How much did your net worth increase by in 2015? Forum

[WhiteCollarBlueShirt]

Very solid negatives here... salary in the low six figures. To get a positive net worth within the next 18 years, I would need to make equity partner or otherwise come into a significant step up in cash inflow.

Should've, could've, would've not law'd so to speak. And at least, should've, could've, would've taken those scholarships over "prestige."

make sure compound interest works for you, not against you

Don't feel so bad. My net worth will be negative until the day I die. Okay, hopefully not, but it will feel like it for a while.

Haha, that's more likely actually for me too. The debt doesn't substantially affect my day-to-day lifestyle, and definitely has proven not to affect my ability to qualify for additional debt (cars, properties, whatever), it is more like a semi-permanent wage garnishment or alimony to the government. With respect to PAYE, the tax bomb may hurt, but, who knows, there will probably be private loans available for that too.

[zot1]

Very solid negatives here... salary in the low six figures. To get a positive net worth within the next 18 years, I would need to make equity partner or otherwise come into a significant step up in cash inflow.

Should've, could've, would've not law'd so to speak. And at least, should've, could've, would've taken those scholarships over "prestige."

make sure compound interest works for you, not against you

Don't feel so bad. My net worth will be negative until the day I die. Okay, hopefully not, but it will feel like it for a while.

Haha, that's more likely actually for me too. The debt doesn't substantially affect my day-to-day lifestyle, and definitely has proven not to affect my ability to qualify for additional debt (cars, properties, whatever), it is more like a semi-permanent wage garnishment or alimony to the government. With respect to PAYE, the tax bomb may hurt, but, who knows, there will probably be private loans available for that too.

Yeah same here. I have a good lifestyle now. Just something in the back of my head for at least the next 9.5 years.

My biggest problem right now is that I used a credit card for expenses during bar prep instead of a loan. To everyone reading, don't do that. It's stupid. It's easier to pay a loan than a credit card.

But once that is paid off, life will be a lot sweeter.

[in house lawyer]

What net worth?

$1.4 million

I'm 31, so probably one of the older people here

[rdawkins28]

negative something. i'm a true american - i spend more than i make, regardless of how much i make. heh.

[zot1]

What net worth?

$1.4 million

I'm 31, so probably one of the older people here

My comment was more as a joke because my net worth is nothing like yours. Not even close.

You're also not that much older. I'll be your age in 4 years and no, my net worth will still not look anything close to yours right now.

[magnum_law]

What net worth?

$1.4 million

I'm 31, so probably one of the older people here

Tips?

[zot1]

What net worth?

$1.4 million

I'm 31, so probably one of the older people here

Tips?

Make more money than you do now.

[Lexaholik]

If you worked a full year and what was your salary?

I earned about $85k in 2015 and my net worth increased by about $40k.

I live in a super-high COL place--SF Bay Area--but don't own a home. I didn't actually work the full year because I left my firm to open my own solo practice. At that time I had a NW somewhere in the low to mid-six figures--enough saved/invested to last me about a decade without working.

My thoughts:

- Making more money will solve your short-term money problems but not if you don't understand personal finance.

- If you have no interest in money just remember to spend less than you earn. It will be hard at first but after a while you'll realize that don't have to sacrifice your quality of life.

- Save up a small stash of FU Money. It doesn't have to be big--I'm not talking about enough money to retire. Just save up enough to let you coast without working for several months to a year. That will reduce job anxiety and give you freedom to take risks without screwing yourself over with debt.

- You don't need to know all of your financial details (I'm terrible with budgeting) but have a rough idea of your biggest costs. For most people in high COL areas it's probably housing.

- Pay down your high interest student debt. Paying off a 6% loan is like getting a guaranteed 6% return.

- There are ways to keep your expenses down even in high COL areas. My wife and I split a rent-stabilized 1 bedroom in Oakland for about 33% of what many Bay Area lawyers pay for a 1BR.

- On that note, don't follow the herd and buy a house before you are financially ready. Contrary to popular opinion, renting is not throwing money away as long as you remember to save and invest the difference.

- Over time let compounding do the work for you. Most of my NW is in stock index funds, but the market went sideways in 2015. But I still did well. In 2015, passive income (dividends and interest) from my investments roughly covered my share of the rent.

Some additional thoughts:

From what I understand associates and/or partners are pretty constrained from investing/trading in the market for insider trading reasons. Does anyone have any advice on how to get around this or how to invest in a way that won't send me to jail?

When I used to work in Biglaw, there were two ways around this. First you could invest in index funds (which you probably should regardless) without any problem. Second, you could request authorization from HR before purchasing or selling individual securities. However, unless you can analyze securities you should put most of your money in plain index funds.

To get a positive net worth within the next 18 years, I would need to make equity partner or otherwise come into a significant step up in cash inflow.

Should've, could've, would've not law'd so to speak. And at least, should've, could've, would've taken those scholarships over "prestige."

make sure compound interest works for you, not against you

There are many ways to get to positive NW without high income. Learn about personal finance. Attack your biggest costs and make strategic sacrifices. Pay down high interest debt and cut costs you don't need. You will get there slowly but surely. The "earn more money someday" can be effective but makes me shudder because without basic personal finance skills you're probably going to experience substantial lifestyle creep. That quote about compound interest is so on point though.

My biggest problem right now is that I used a credit card for expenses during bar prep instead of a loan. To everyone reading, don't do that. It's stupid. It's easier to pay a loan than a credit card.

But once that is paid off, life will be a lot sweeter.

Have you considered checking out zero interest balance transfers? Some of my classmates have been successful with this tactic. Open a new account, transfer old balance to new card and have a year of zero interest. Work on paying off the principal while you're being charged zero interest. Continue doing this for a year, and when the year is up, consider finding a new zero interest balance transfer.

[Anonymous User]

My comment was more as a joke

I know, but I always find net worth / personal finance discussions interesting.

You're also not that much older. I'll be your age in 4 years and no, my net worth will still not look anything close to yours right now.

You never know. I never thought we'd have this net worth at this age (this is for 2 people, although I've always been the primary earner). Aggressive saving and investing plus some time make a huge difference.

[in house lawyer]

Oops another accidental anon

[zot1]

Have you considered checking out zero interest balance transfers? Some of my classmates have been successful with this tactic. Open a new account, transfer old balance to new card and have a year of zero interest. Work on paying off the principal while you're being charged zero interest. Continue doing this for a year, and when the year is up, consider finding a new zero interest balance transfer.

Yes. Problem is that it is the spouse's credit card, and spouse hasn't been able to find work, so it's hard to get another card with no income.

[zot1]

My comment was more as a joke

I know, but I always find net worth / personal finance discussions interesting.

You're also not that much older. I'll be your age in 4 years and no, my net worth will still not look anything close to yours right now.

You never know. I never thought we'd have this net worth at this age (this is for 2 people, although I've always been the primary earner). Aggressive saving and investing plus some time make a huge difference.

That is true. I'll keep that in mind.

[bdubs]

Have you considered checking out zero interest balance transfers? Some of my classmates have been successful with this tactic. Open a new account, transfer old balance to new card and have a year of zero interest. Work on paying off the principal while you're being charged zero interest. Continue doing this for a year, and when the year is up, consider finding a new zero interest balance transfer.

Yes. Problem is that it is the spouse's credit card, and spouse hasn't been able to find work, so it's hard to get another card with no income.

Keep in mind that most "zero interest" balance transfers are really not zero interest, but they are usually ~2-3% interest because of the tacked on "fee" that comes with transferring the balance. It's still a pretty decent rate for an unsecured short term debt though.

[in house lawyer]

What net worth?

$1.4 million

I'm 31, so probably one of the older people here

Tips?

Figure out what the absolute minimum amount of money you need to live happily is and don't spend more than that. Invest the rest. This requires (1) knowing yourself well enough to understand what really makes you happy, and (2) consistently making choices in accordance with that. If you do that, your spending will be efficient - every dollar spent or saved will count. Ignore what other people have and what you think you should have, and focus on what you really find meaningful. I'm a lot more thoughtful about my spending and aware of my values since I started looking at my finances this way. As a result, over half of our spending is on housing and travel and almost none of it is on clothing or cars (I'm not judging anyone who would come out the opposite way, I'm just saying make sure it's what makes you truly happy) and our post tax savings rate is 70%. This doesn't feel like a sacrifice at all. It helps to train yourself to never forget everything you have to be grateful for. It's also a huge help to marry someone similarly cheerfully frugal who wants nothing more than more time together.

I think income level and specific investing strategy are less important than learning to save and spend thoughtfully. But do remember to keep investing your massive savings. Check out the bogleheads site for advice on that.

[hous]

70k salary, net worth went up $44k from 1/1/2015 to 1/1/2016 (from -64k to -18k). It's actually like 1.2k away from being positive right now. Next paycheck I will have a positive net worth for the first time since starting law school.

[84651846190]

Not enough

[Helioze]

- There are ways to keep your expenses down even in high COL areas. My wife and I split a rent-stabilized 1 bedroom in Oakland for about 33% of what many Bay Area lawyers pay for a 1BR.

Plz explain how you do this.

[champ33]

70k salary, net worth went up $44k from 1/1/2015 to 1/1/2016 (from -64k to -18k). It's actually like 1.2k away from being positive right now. Next paycheck I will have a positive net worth for the first time since starting law school.

How is that possible? With a 70k salary shouldn't you be taking home less than 44k after taxes?

[mvp99]

70k salary, net worth went up $44k from 1/1/2015 to 1/1/2016 (from -64k to -18k). It's actually like 1.2k away from being positive right now. Next paycheck I will have a positive net worth for the first time since starting law school.

How is that possible? With a 70k salary shouldn't you be taking home less than 44k after taxes?

Hous is an associate at MF.

[magnum_law]

What net worth?

$1.4 million

I'm 31, so probably one of the older people here

Tips?

Figure out what the absolute minimum amount of money you need to live happily is and don't spend more than that. Invest the rest. This requires (1) knowing yourself well enough to understand what really makes you happy, and (2) consistently making choices in accordance with that. If you do that, your spending will be efficient - every dollar spent or saved will count. Ignore what other people have and what you think you should have, and focus on what you really find meaningful. I'm a lot more thoughtful about my spending and aware of my values since I started looking at my finances this way. As a result, over half of our spending is on housing and travel and almost none of it is on clothing or cars (I'm not judging anyone who would come out the opposite way, I'm just saying make sure it's what makes you truly happy) and our post tax savings rate is 70%. This doesn't feel like a sacrifice at all. It helps to train yourself to never forget everything you have to be grateful for. It's also a huge help to marry someone similarly cheerfully frugal who wants nothing more than more time together.

I think income level and specific investing strategy are less important than learning to save and spend thoughtfully. But do remember to keep investing your massive savings. Check out the bogleheads site for advice on that.

Spot-on advice. Thanks for taking the time to type this out.

[hous]

70k salary, net worth went up $44k from 1/1/2015 to 1/1/2016 (from -64k to -18k). It's actually like 1.2k away from being positive right now. Next paycheck I will have a positive net worth for the first time since starting law school.

How is that possible? With a 70k salary shouldn't you be taking home less than 44k after taxes?

I put 18k into my t401k, 5.5k into my tIRA, 3.35k in my HSA. That reduced my taxable income from 70k to 43k. After I took my standard deduction ($6,300), Student loan deduction ($1,455), and exemptions (1 for $4,000) my taxable income was $31,395. This means my total federal tax liability in 2015 was $4,248. So after FICA taxes (approximately $4,800), I had roughly $61,000 in total post-tax income. I was able to live off of $17,000 for the year. Keep in mind, a large portion of my 2015 net worth was paying down principal on my student loans. The $17,000 just went into travel, food, bills, gas, clothes, entertainment, ect. I churn credit cards to get free flights for my travel so that helped save a lot. I just have to pay for hotels and I stay under $150 each night for hotels. I'm fortunate enough to have a spouse whose parents gave her a house to live in free (she paid for half of it) so I don't have a mortgage either which is huge.

[zot1]

70k salary, net worth went up $44k from 1/1/2015 to 1/1/2016 (from -64k to -18k). It's actually like 1.2k away from being positive right now. Next paycheck I will have a positive net worth for the first time since starting law school.

How is that possible? With a 70k salary shouldn't you be taking home less than 44k after taxes?

I put 18k into my t401k, 5.5k into my tIRA, 3.35k in my HSA. That reduced my taxable income from 70k to 43k. After I took my standard deduction ($6,300), Student loan deduction ($1,455), and exemptions (1 for $4,000) my taxable income was $31,395. This means my total federal tax liability in 2015 was $4,248. So after FICA taxes (approximately $4,800), I had roughly $61,000 in total post-tax income. I was able to live off of $17,000 for the year. Keep in mind, a large portion of my 2015 net worth was paying down principal on my student loans. The $17,000 just went into travel, food, bills, gas, clothes, entertainment, ect. I churn credit cards to get free flights for my travel so that helped save a lot. I just have to pay for hotels and I stay under $150 each night for hotels. I'm fortunate enough to have a spouse whose parents gave her a house to live in free (she paid for half of it) so I don't have a mortgage either which is huge.

Here's the actual answer.

[zot1]

Y'all include what you've contributed to retirement when calculating your net worth?

[anonnymouse]

Y'all include what you've contributed to retirement when calculating your net worth?

Yes, why wouldn't you?

If your answer is "because taxes" or "because 59.5" you haven't done enough research on 72t distributions and Roth ladders. Sure, taxes on distributions are/will be non-zero but that is fairly likely the case for taxable accounts, as well, though probably to a lesser extent.

[zot1]

Y'all include what you've contributed to retirement when calculating your net worth?

Yes, why wouldn't you?

If your answer is "because taxes" or "because 59.5" you haven't done enough research on 72t distributions and Roth ladders. Sure, taxes on distributions are/will be non-zero but that is fairly likely the case for taxable accounts, as well, though probably to a lesser extent.

My plan is different because I'm in government. I was just curious. I'm obviously not as financially savvy as some of y'all. That's why I'm trying to learn.