I know you came for the numbers, so without further ado here they are:
- My net worth now*: £688k
- My FIRE Fund now*: £430k
- My FIRE Fund Target: £750k
What is in my net worth?
So firstly how do I define my net worth? Most accountants can agree that your net worth is defined as follows:
Net Worth = Assets – Liabilities.
Assets = An accurate value of all you own
Liabilities = An accurate value of all you owe
However, where it gets interesting, is what do you include in your assets? The personal finance blogging community has lots of variety and can’t reach a consensus on this point. The main sticking points seems to be your primary residence, i.e. the home you own and live in. I personally include my residence. I live in London, and I could theoretically sell up and move elsewhere. Hence I believe that my home equity is a real asset.
In my assets I include an estimated value of my primary residence, my pensions, ISAs, taxable and cash accounts. For my liabilities I include my mortgage, a provision for tax and any credit card balances. Some interesting reading on two opposing methods used in calculations here: Your Wealth Management or Socialist Net Worth.
If you want to start tracking your own net worth, consistency is more important than your definition. Ultimately, you want to compare your numbers today against your numbers last month and last year. And if you want to peruse other personal finance bloggers net worths? A group of us submit them for public consumption at Rockstar Finance.
Why a FIRE fund?
This is a much easier one to answer. My FIRE fund is the money I am investing to live on post retirement. It includes pensions, ISA, taxable investments and cash. My FIRE fund excludes my primary residence and it’s mortgage. By defining my FIRE fund separately, I know what assets are available to me in early retirement. I have a target value for my FIRE fund rather than net worth. The reasons for this are twofold, the latter is overly influenced by the London property market, and I want to apply the 4% rule to the assets that will actually be available to me.
Graphs can be interesting, or can be boring. I’ve gone for what I hope you can agree is the former.
How are yours looking? Do you also track?
(*) Updated with March 2018 data