For 2020, my streach goal is to reach $0 net worth.
For those who don’t know, Net Worth is calculated by subtracting your total debt from your total debt.
For example, if I have $25,000 shared between my checking, savings, and 401(k) but own $20,000 on a car note then my net worth is $5000.
$25,000 (assets) – $20,000 (debt) = $5,000 Net Worth
Question: Can I go from -$18,728 to $0 net worth in 12 months?
Research
My starting point is -$18,728. 100% my debt right now is mortgage debt. Instead of focusing on paying the debt down I’m going to use investing in retirement accounts as a strategy to increase my net worth.
My reasoning behind this is straightforward. Every dollar I put toward my mortgage will grow at the rate of inflation which is about 3% a year. However, every dollar I invest has the potential to grow about 10% per year when you don’t include inflation.
To put things simply while adjusting for inflation.
Paying off Mortgage debt: $1=$1
Investing in my retirement account: $1=$1.07
Seven cents per dollar may not seem like a lot but if you’re compounding an average of 7% growth across thousands of dollars over the course of a year I’ll be able to maximize the growth potential for every dollar.
The company I work for matches 6% of my 401(k) contribution & up to $150 of my HSA contribution. That’s free money that’ll I’ll be taking advantage of in addition to contributing up to 20% of my income into other investment vehicles.
What will count toward my net worth:
Checking/Savings Accounts
Retirement accounts (401(k), ROTH IRA, etc)
Mortgage debt
What won’t count toward my net worth:
Vehicles
Individual Stocks
- Estimated Home Value
Hypothesis: I should focus on investing a larger percentage of my income to raise the value of my assets instead of paying down debt
Experiment
Week 1 1/5/2020
Week 2 1/12/2020
Week 3 1/19/2020
Week 4 1/26/2020
Week 5 2/2/2020
Week 6 2/9/2020
Week 7 2/16/2020
Week 8 2/23/2020
Week 9 3/1/2020
Week 10 3/8/2020
Week 11 3/15/2020
Week 12 3/22/2020
Week 13 3/29/20
Week 14 4/5/20
Week 15 4/12/20
Week 16 4/19/20
Week 17 4/26/20
Week 18 5/3/20
Week 19 5/10/20
Week 20 5/17/20
Week 21 5/24/20
Week 22 5/31/20
Week 23 6/7/20
Week 24 6/14/20
Week 25 6/21/20
Week 26 6/28/20
Week 27 7/5/20
Week 28 7/12/20
Week 29 7/19/20
Week 30 7/26/20
Week 31 8/2/20
Week 32 8/9/20
Week 33 8/16/20
Week 34 8/23/20
Week 35 8/30/20
Week 36 9/6/20
Week 37 9/13/20
Week 38 9/21/20
Week 39 9/27/20
Week 40 10/4/20
Week 41 10/11/20
