Life is messy. I don’t really know how else to put it. This month has been a series of small accomplishments for us and some very big challenges, mistakes, and rebalancing. I thought I would write them out here in case they are useful for you.
Net Worth (was is the right number to use?)
We are about 200 pounds away from being at zero net worth. This is such an important step for us after spending almost all of our life together in negative net worth. And yet, my calculation for net worth is really tricky, however, because it includes our previous valuation on the house and the housing market is basically frozen by covid-19. It also includes my estimate of our car, which may also be incorrect. I thought that I would include this graph, however, just for you to see what our rapid debt payoff looks like and how just a couple of months of paying off stuff can really help (especially when you include mortgage payments into your calculation). We are just so close to that 0 line! Common zero line, come to me!
Just to be a bit more sober and not so self congratulatory, I also did it without the house. We are still in negative net worth if you do not include the house ~ 25K so there is also that. Calculating more than one version of worth is useful in that it makes you realize that these numbers that you use as guides for your financial wellbeing are just that, guides. They are not numbers to be rarefied. They are indicators of where you are and not a complete pictures of your financial health. Numbers are really important to tell a story but they are aggregated information. They can be biased (like the above healthy picture is biased towards housing wealth). Make sure that you know exactly how and why your images and numbers are they way they are and consequently, where you are vulnerable (we are hence vulnerable to housing market fluctuations, which are likely going to be wild for awhile).
The bad news is that my spouse has been furloughed because of this massive economic depression but the good news is that he should be getting his salary at least for a couple of months. The other bad bad news is that my institution may also go under. They are sending dramatic emails. There is no talk of voluntary severance yet, but it could happen. I’m in an industry that talks a lot about “tenure” and “permanent job contracts” but this crisis will definitely shape higher education in ways that are sure to mean less job security. I also lost all of my summer income from teaching summer school, which is about 20% of my annual salary. So a lot less income and expected future income for us. The loss of future income has an impact on how I think about our debt strategy moving forward, and especially, paying off higher interest debt first.
I have moved all of our stocks and shares ISAs to cash ISAs for our emergency fund. This involved selling stocks when they were lower and taking a hit on those. Fortunately, our portfolio was very very timid to start with because we had so little money and so we didn’t lose a tonne of money but I have lost about half a months saving in moving all our stocks into cash in case we need it immediately. Perhaps this loss is my fault for not having a large enough emergency fund to start with and being too complacent that things were going to march forward.
Our goal is now to have about 5/6 months of one person’s income in cash (so 50% of our current income). Currently, we have about 3 months. I’m hoping that we can set aside the furloughed money into savings and move directly into a situation where we are only living on one income as of next month. I definitely feel like my desires to catch up on investing for retirement made us underpay into our emergency fund. I would be curious to hear if other people feel this way as well.
I have some more concerns about our finances, but these are the big steps I have taken as of late. Let me know if these are helpful. Be well and healthy everyone. ❤