Net Worth: Loss of Control Angst

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slug
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Net Worth: Loss of Control Angst

Post by slug »

I was going to post this on my blog (I still might), but I think the people best suited to help me are probably here. I'm in my late 30's, over-educated so I've only been working making good money for less than a decade. My only debts are student loans and mortgage. Both have rates so low that I would rather put the money in the market. Our finances are in great order. And somehow now I'm having a crisis...

The vast majority of my wealth is tied to 2 things.

My house. If the last few years have taught you nothing about the housing market, then you have not been paying attention. The value of my home has moved up and down in a $70,000 range, and I of course have had little to no control over that valuation. It's completely market driven. And, it has a meaningful effect on my ability calculate net worth. So much so that I actually started calculating net worth with and without real estate included.

My retirement accounts. I mostly invest in index funds in my Roth, rollover, and 401k accounts. Probably 70/30 towards stocks. Again, the valuation is completely market driven. As the markets took off again last year, so did my net worth. It's large enough to move thousands of dollars each day. I control the contribution rate, but I max the Roth and 401k every year now so those things are baked into the growth.

I still track my net worth each month and analyze our spending, but there's really no more optimization to be had unless I get a better job/new source of revenue. The cash/spending accounts amount to less than 10% of the total, and that percentage is slowly shrinking. It leaves me feeling kind of powerless.

The days when I could pack a lunch every day for a month rather than eating out and watching its impact on my wealth are gone. The "latte factor" is a rounding error for me. I know this is a total first world problem that most people would love to have, but it's still bugging me. Basically, the story here is that I no longer truly feel in control of my wealth building in the same ways as before, and I'm not as comfortable as I would like to be.

I can't tell if it's truly the lack of control or the knowledge that my day to day spending choices are almost irrelevant now. It might be the latter. How do I stay disciplined in this kind of situation. My personal finance habits are highly ingrained, but how does one avoid slipping? How do I continue to instill good habits in my son when money really isn't an issue? How do I get comfortable with so much of my wealth at the whims of the market?
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dickenjb
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Re: Net Worth: Loss of Control Angst

Post by dickenjb »

All I can say is get used to it.

My net worth changes by tens of thousands each day.

I only look at my net worth once a year.

Maybe you are "peeking" too much?

What benefit do you get my checking net worth monthly? What decisions does it drive? If none, why are you doing it?
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Re: Net Worth: Loss of Control Angst

Post by dbr »

Good habits move to a different level. Staying disciplined to live beneath one's means is still essential or one can fritter away any amount of money. Having a sensible plan for investing (allocation, location, fund selection) and not altering that plan in panic or by listening to noise is still essential. Having the discipline to to not react to variation is essential. Some people say stop looking at your worth. I say look at your worth everyday, shrug, and move on and do the things that are important in life.
Last edited by dbr on Wed Mar 27, 2013 8:06 am, edited 1 time in total.
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Re: Net Worth: Loss of Control Angst

Post by RadAudit »

slug wrote:How do I continue to instill good habits in my son when money really isn't an issue?
You are worrying too much about yourself.

Try helping the poor and the disadvantaged. As someone pointed out several years ago, the poor will always be with us. Should keep you busy for awhile.

Or you could get involved in community service or local politics - the two are not necessarily mutually exclusive.

Get involved with programs that are geared to helping kids. Scouting can be a good organization.

If you are disciplined enough to amass the amount of money you are talking about, you have the skills necessary to help out in a number of volunteer organizations, local boards, etc. It would seem the best way to instill good habits in the next generation is to serve as a living example while maintaining all your other obligations - taking care of the family, putting food on the table, etc. Doubt if you'll have any time left over to worry about fluctuations in your net worth.
Last edited by RadAudit on Wed Mar 27, 2013 8:03 am, edited 1 time in total.
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Re: Net Worth: Loss of Control Angst

Post by prudent »

The way I avoid getting distracted is by focusing on my monthly savings and relating that to how long it would sustain me in retirement. I can control how much I save, not how the investments do. So each month I remind myself that I have saved for another two weeks of retirement expense.

I also don't adjust my home value in net worth calculations. I think I last adjusted the number in 2009. I'm not going to sell it in the near future, so it doesn't matter how the value fluctuates. It counts for something, but as a fixed amount.
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Re: Net Worth: Loss of Control Angst

Post by midareff »

Welcome to the real world....... you have invested in markets and markets go up and they go down, but the long run is what is important and that is favorable for investors. You can only control what you can control and that is your savings rate, your asset allocation and rebalancing to control risk level. The market will be the market and do what markets do ...... go up and down. It's all noise, geopolitical situations, yadda, yadda ... it's all rebalance opportunities when things get far enough out of your written investment plan.

You can't measure progress day to day, month to month or even year to year in many cases ...... but as long as you stay to your long term plan and it is reasonable, success will be yours.

Try setting up a spread sheet with yearly columns to establish your goals and track your progress..... perhaps the first day of each year. Other than that go play with your kids and stop worrying about a psychological pile of money.
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Re: Net Worth: Loss of Control Angst

Post by Grt2bOutdoors »

Do you have a mortgage? Work on paying it off - it will accomplish two things: 1)each month your equity will go up 2)your debt will decline.
Do you have a 529 plan? Open one, each month throw some cash into it, watch the value grow or not, but each month you pay in is some amount less you will need to come up with in the future. Take that latte money and send it to the 529 account.
Not sure how old your child(ren) are, but you lead by example on money management, investing principles. If you lead a life of excess, they will be accustomed to it and expect it, without figuring out how to get it. If you leave a life of comfort, but effort is needed and shown to obtain that life, they will learn by that example. Too much money floating around is not good, too little is not great either, you need to balance it. Spoil the kids, you and they will pay a price later on.
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Re: Net Worth: Loss of Control Angst

Post by Niko »

slug wrote:How do I stay disciplined in this kind of situation. My personal finance habits are highly ingrained, but how does one avoid slipping? How do I continue to instill good habits in my son when money really isn't an issue?
Try this.

In the early accumulation phase, as you noted, the value of incremental saving is quite noticeable. For every latte deferred, it's $4 more you can save. Do that 20 times a month and you have an extra $80 to save, or $960/year. Cancelling (or minimizing) your cable package can save a similar amount. Etc.

But as you explained, the incremental value of this saving diminishes once your nest egg hits a certain threshold and develops a life of its own. Rather than ignore the incremental saving, continue to focus on it. While it may provide (relatively) little effect on your portfolio size, your spending will continue to greatly affect your magic number -- eg the amount of money you need to be financially independent. If you spend $40,000 instead of $50,000 per year, your magic number will be $1M rather than $1.25M. A difference of a quarter million dollars all for keeping your spending in check.

In other words, you need to shift the focus of your personal spending habits. Don't think about what your small savings will grow to. Rather, think about how your limited spending will reduce the need to save (and work) longer to support than spending.

Failing all that, send me some of your money so it becomes my problem and not yours! :beer
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Re: Net Worth: Loss of Control Angst

Post by momar »

Congratulations, you did it. Enjoy a latte once in a while. Eat out for lunch a couple times per week. Or whatever your poison is, indulge it a little.

The point of deprivation isn't for deprivations sake. It is to accomplish a goal, or speed its accomplishment. You seem to have done that.

I believe livesoft has posted that his rule of thumb is that he can spend on luxuries an amount up to how much his portfolio fluctuates on a day with a big move. I always liked that rule.

No one says you have to enjoy these little luxuries in front of your kid, if that's what concerns you. Keep ordering water at the restaurant in front of him.
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Re: Net Worth: Loss of Control Angst

Post by sscritic »

slug wrote: How do I stay disciplined in this kind of situation. ... How do I continue to instill good habits in my son when money really isn't an issue?
The latter answers the former. You live good habits so as to instill them in your son. Isn't that motivation enough?

My daughter is in her late 30's and often tells me of her latest "pulled a dad," e.g., saved money by noticing a lower price 10 days later and getting a refund even though the official price guarantee was only for 7 days. Your children learn from what you do.
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Re: Net Worth: Loss of Control Angst

Post by Cut-Throat »

Wait until you are old enough to realize that you have more money than time. Then you'll have to start scrambling to complete your bucket list. It's a completely different mindset.
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Re: Net Worth: Loss of Control Angst

Post by The Wizard »

OP doesn't mention Savings Rate or after-tax investments.
Good to max out tax-sheltered plans first but then put additional money into after-tax investments.
Plus make accelerated payments on your edu loans, even if APR is only 3%.
I would split excess funds 50/50 between those two until edu loans are paid off.
Offspring financial responsibility is a different topic..
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Re: Net Worth: Loss of Control Angst

Post by travellight »

I guess I have the same situation but take a glass half full approach.... I count my blessings that my net worth can climb so much faster than I can personally earn or contribute because of the wonderful market. When it goes the other way, I just shrug it off and wait to recover.

I see my net worth in two buckets: one is market driven and I have no control over other than putting it in that bucket and deciding if I want to keep it there, and the other bucket is saving and paying down mortgage which I have complete control over. I work on the second bucket and see its direct impact on my net worth weekly. (I just do this weekly because I use mint.com which reports weekly)
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Re: Net Worth: Loss of Control Angst

Post by englishgirl »

I ignore my house value, and don't usually calculate net worth. I'd rather look at just the value of my retirement accounts. This is partly because I view housing as a consumption item - I'll always need somewhere to live. If I'm very lucky, at some point, I'll sell something and make a profit. If I'm not lucky, I won't make a profit. Probably it'll just be part of my estate. Yes, in the back of my mind there's always the thought that if push came to shove, I could get a reverse mortgage in retirement, but I mentally park that in my mind as part of my emergency planning. I don't think about my cash holdings either - are they truly a part of my net worth, or not? The day before and the day after I buy a new car, or pay my property tax bill, am I really "worth" different amounts?

As for what I'm saving becoming an insignificant factor, well, I'm not quite there yet. But sometimes I do what I did this morning when I feel smug at how much my retirement accounts have grown, which is go to immediateannuities.com, and plug in the entire value of my retirement accounts to see what sort of annuity I could buy - both for if I retired today, and for if I retired at 67 without my accounts having grown any further. Invariably, I think "uh oh, that's not much" and remind myself that I'd better keep saving.

Mental accounting, I suppose. But I think just the act of continuing to save is what's important. Not necessarily focusing on how muh of a percentage that is in relation to your holdings.
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Re: Net Worth: Loss of Control Angst

Post by englishgirl »

Niko wrote:In the early accumulation phase, as you noted, the value of incremental saving is quite noticeable. For every latte deferred, it's $4 more you can save. Do that 20 times a month and you have an extra $80 to save, or $960/year. Cancelling (or minimizing) your cable package can save a similar amount. Etc.

But as you explained, the incremental value of this saving diminishes once your nest egg hits a certain threshold and develops a life of its own. Rather than ignore the incremental saving, continue to focus on it. While it may provide (relatively) little effect on your portfolio size, your spending will continue to greatly affect your magic number -- eg the amount of money you need to be financially independent. If you spend $40,000 instead of $50,000 per year, your magic number will be $1M rather than $1.25M. A difference of a quarter million dollars all for keeping your spending in check.

In other words, you need to shift the focus of your personal spending habits. Don't think about what your small savings will grow to. Rather, think about how your limited spending will reduce the need to save (and work) longer to support than spending.

Failing all that, send me some of your money so it becomes my problem and not yours! :beer
This is good advice!
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Re: Net Worth: Loss of Control Angst

Post by steadyeddy »

If you've saved enough that the "latte factor" is no longer a factor for you, then enjoy a celebratory latte--you've earned it!

Your goal in this next phase of accumulation is to mind the "boat factor." Steer clear of a celebretory boats and the like and you'll continue to do well. :sharebeer
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Re: Net Worth: Loss of Control Angst

Post by The Wizard »

steadyeddy wrote:If you've saved enough that the "latte factor" is no longer a factor for you, then enjoy a celebratory latte--you've earned it!

Your goal in this next phase of accumulation is to mind the "boat factor." Steer clear of a celebretory boats and the like and you'll continue to do well. :sharebeer
I wouldn't celebrate much quite yet.
OP says both edu and mortgage loans exist, but no numbers.
Could easily be > one year's income.
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Re: Net Worth: Loss of Control Angst

Post by BlueEars »

slug wrote:...(snip)...
The days when I could pack a lunch every day for a month rather than eating out and watching its impact on my wealth are gone. The "latte factor" is a rounding error for me. I know this is a total first world problem that most people would love to have, but it's still bugging me. Basically, the story here is that I no longer truly feel in control of my wealth building in the same ways as before, and I'm not as comfortable as I would like to be.
...
This is well stated.

Sounds like free floating anxiety. Maybe start by thinking about wealth in only percentages, not dollars. Remember the up days, usually there are more of them. If you are lucky and your wealth continues to grow, you'll be able to look forward to even more challenging adjustments. Then there are the crashes like 1987 and 2008. :happy
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Re: Net Worth: Loss of Control Angst

Post by Peter Foley »

While you are perhaps too early in the acumulation stage to do this, I found that my angst was reduced considerably when I moved to an allocation of less than 50% equity. I had reached my goal and was closing in on my retirement date. While the market can still move my net worth by thousands in a day, I really don't care. I've reached an equilibrium of sorts - if the market goes up I recognize I'm doing well. If it goes down, I look for it to go lower so I can rebalance. I still try to catch the daily recap of the market, but there is no emotion involved.

My current "angst" is how am I go to shift gears to spend what I have? I find it difficult to spend money as there is little I actually want.
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Re: Net Worth: Loss of Control Angst

Post by Call_Me_Op »

It's an illusion that your day to day spending choices are irrelevant. The effect is buried in a lot of noise, but it is very real. It is only evident over longer time periods.
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Re: Net Worth: Loss of Control Angst

Post by slug »

There are lots of good response so far that I really appreciate it. Let me add some clarity:

The mortgage is at $290k fixed at 4% with an effective rate of around 2.8% given deductions. I pay the minimum because I feel better continuing to build emergency fund and buying into the market.

The education loans are around $50k split between fixed (2.5%) and variable rate (1.5%) unadjusted for deductions which are getting small due to the income threshold. I make accelerated payments to the variable loans because I want to knock them out before rates rise.

None of that debt feels like a weight. Rather it feels like leverage to open up more investment. I know others hate debt more than me.

The 529 plan is in the low 5 figures and funded monthly. My kid is 6.

I donate to charities, volunteer at school, sit on the advisory board at a credit union and was president of a local non-profit until last Dec. I also am active at school board and town board meetings. I am engaged in my community, and I give back plenty.

My takeaways so far are:

Focus on the pieces you can control, and how these incremental pieces get you one day closer to retiring.

My son will learn more from what I do rather than what I say. Continuing to live a life of rational personal finance decisions and not spoiling him will set the right example.

Continue to track net worth but shrug at uncontrollable variation and go play LEGO's.

Keep eyes on long-term $4M prize and every penny of day to day spending choices that brings me that much closer.

Thank you again for your feedback. It is illuminating. I knew you all could help.
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Re: Net Worth: Loss of Control Angst

Post by WVUGuy275 »

slug wrote:... I of course have had little to no control over that valuation. It's completely market driven. And, it has a meaningful effect on my ability calculate net worth. So much so that I actually started calculating net worth with and without real estate included.

My retirement accounts. I mostly invest in index funds in my Roth, rollover, and 401k accounts. Probably 70/30 towards stocks. Again, the valuation is completely market driven. As the markets took off again last year, so did my net worth.
Sir, I submit to you that the valuation of your assets is not driven by the market. The market only dictates the price at which you could liquidate your assets right now.

Price != Value

Go have some more rounding-error coffee. And since you're buying, a double espresso for me please. :D
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Re: Net Worth: Loss of Control Angst

Post by retiredjg »

sscritic wrote:
slug wrote: How do I stay disciplined in this kind of situation. ... How do I continue to instill good habits in my son when money really isn't an issue?
The latter answers the former. You live good habits so as to instill them in your son. Isn't that motivation enough?
I had this exact same thought.

Forget your own wealth. It has become essentially meaningless. That job is done and apparently you are grieving it a bit and you are not sure what to do with yourself. So find a new motivation and goal. Make sure your son learns the difference between having wealth and earning wealth. Concentrate on character, not money. And have another kid or two. That'll fix ya! :happy
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Re: Net Worth: Loss of Control Angst

Post by Watty »

One alternative would be to redirect the focus you have had on investing and saving into working on your health and fitness so that you have a higher likelihood of living long enough to enjoy your money.

Tracking how many time you exercise each month and how close you are to being at your desired weight is a lot like tracking your monthly savings and account balance growth used to be.
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Re: Net Worth: Loss of Control Angst

Post by Cash »

I've had similar thoughts lately. No spending patterns left to optimize. No new sources of income. Just waiting for time to pass and numbers to (hopefully) go up. In other words, I'm bored. But I guess that's not a bad thing. I just need another hobby.
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Re: Net Worth: Loss of Control Angst

Post by slug »

Watty wrote:One alternative would be to redirect the focus you have had on investing and saving into working on your health and fitness so that you have a higher likelihood of living long enough to enjoy your money.

Tracking how many time you exercise each month and how close you are to being at your desired weight is a lot like tracking your monthly savings and account balance growth used to be.
I knew there was a reason I invested in P90x! And, yes I love the tracking.
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Re: Net Worth: Loss of Control Angst

Post by Nathan Drake »

I'm in a similar boat, except I don't have a mortgage. I wouldn't worry about the mortgage value too much -- you have to live somewhere, think of it more as a consumption item that's not liquid.

I check my net worth every single day -- I know people recommend NOT to do this, but it never results in me taking a knee-jerk reaction to my portfolio, so it's harmless.

I've found that during difficult periods (2009, 2011) where the market loses significant value in a short period of time, I accept the current market value of my net worth and continue my regular savings/investments to increase my net worth from its new established baseline. That's all I can do. What's done is done, the market is out of my control. So, even if the market has dropped 10-20%, I accept it and move on, focusing on new contributions that will increase my net worth from where it currently stands.

Perhaps a better way to look at your net worth is not in the price, but in how many shares you have accumulated. If you're not going to sell your investments for decades, then the current market price is somewhat irrelevant.

Over long periods of time, even when the market has been at its worst with a significant secular bear, you've generally beaten inflation. And if not, you've only done slightly worse. More commonly however, investors have been rewarded, and the compounding effects are substantial.
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Re: Net Worth: Loss of Control Angst

Post by livesoft »

slug wrote:.... How do I stay disciplined in this kind of situation. My personal finance habits are highly ingrained, but how does one avoid slipping? How do I continue to instill good habits in my son when money really isn't an issue? How do I get comfortable with so much of my wealth at the whims of the market?
After the second million, you work on the 3rd, the 4th, .... If that is not enough, you set a goal to increase net worth by $100,000 a quarter. If that's not enough, then $100K a month. You will have to watch those lattes or it's gonna be harder. That ought to keep you from slipping.

And if that doesn't work, you give away a million ... or two.
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Re: Net Worth: Loss of Control Angst

Post by market timer »

Nathan Drake wrote:Perhaps a better way to look at your net worth is not in the price, but in how many shares you have accumulated. If you're not going to sell your investments for decades, then the current market price is somewhat irrelevant.
I think this is the right idea, but it might be more meaningful to look at expected dividends and interest payments, both of which fluctuate far less than asset prices. A 70/30 portfolio likely has a dividend + interest yield of around 2.4%. So, if you have $500K invested, you're still only receiving about $1000/month in passive income. The latte factor is still somewhat meaningful in relation to this passive income. Think of yourself as worth $1000/month ($33/day), instead of $500K +/- $10K.
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Re: Net Worth: Loss of Control Angst

Post by letsgobobby »

retiredjg wrote:
sscritic wrote:
slug wrote: How do I stay disciplined in this kind of situation. ... How do I continue to instill good habits in my son when money really isn't an issue?
The latter answers the former. You live good habits so as to instill them in your son. Isn't that motivation enough?
I had this exact same thought.

Forget your own wealth. It has become essentially meaningless. That job is done and apparently you are grieving it a bit and you are not sure what to do with yourself. So find a new motivation and goal. Make sure your son learns the difference between having wealth and earning wealth. Concentrate on character, not money. And have another kid or two. That'll fix ya! :happy
Well put Jan.

I am also transitioning from "scrounging to get ahead" to "I think it's pretty clear I'm going to win this war."

So now I have a new anxiety: how do I postpone the "inevitable" decline in productivity in future generations, so that my children and grandchildren strive to capitalize on their human capital and our family's values - articulated and modeled over at least three generations - rather than coast on the coattails of what previous generations have built? Am I myself meeting, exceeding, or falling short of my parents' accomplishments, particularly intellectual and professional?

In author James Hughes' words, how do I fend off the threat of entropy? In what ways is my family different? How do I teach my children that living in a large house doesn't mean we are rich? But that I do believe we are different, and that we expect different things from them?

These worries crystallized last month at my daughter's birthday party when one of her friends asked her mom, "Are they rich," apparently based on our house.

Believe me, these worries keep me up at night. My kids are three and six, too early to be confident that that war has been won.
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Re: Net Worth: Loss of Control Angst

Post by kitteh »

I don't include the value of my house in my net worth except to think of it as a possible fallback source of funds if I wind up in assisted living or whatever. It's value has varied all over the place, but it's my home, not an investment. Ditto cars.

As to the kids, some wealthy families seem to produce kids who go into public service, environmental jobs of various sorts and others produce kids who spend their lives partying on table tops and who we could hold up as bad examples to the kids in our vicinity. I don't know how the former do that, except to note that the kids seem to take after the parents, i.e. they live by the principles the parents live by.
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Re: Net Worth: Loss of Control Angst

Post by FillorKill »

slug wrote:Our finances are in great order. And somehow now I'm having a crisis...

...It leaves me feeling kind of powerless.

The days when I could pack a lunch every day for a month rather than eating out and watching its impact on my wealth are gone... I'm not as comfortable as I would like to be.
The "I'm getting wealthy" AKA "my plan is working" crisis? Yeah that is a bummer. Sorry about that... :D

You and I couldn't have more diametrically opposed viewpoints on this. This makes me feel powerful not powerless. Part of my early goal was to get to this point. This is nirvana my friend.

Still working? Yes but it doesn't much matter - sigh of relief
Still saving? Sure but it doesn't much matter - sigh of relief
What if you lose your job? I'll do something else [or not].

I never really used a budget or tracked things at the extreme OCD/granular level [and I sure don't now]. That seemed like an unpleasant activity that I rather avoided.

My options have expanded I have more control over my life than ever before. What's not to like?
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Re: Net Worth: Loss of Control Angst

Post by prudent »

letsgobobby wrote: So now I have a new anxiety: how do I postpone the "inevitable" decline in productivity in future generations, so that my children and grandchildren strive to capitalize on their human capital and our family's values - articulated and modeled over at least three generations - rather than coast on the coattails of what previous generations have built? Am I myself meeting, exceeding, or falling short of my parents' accomplishments, particularly intellectual and professional?

In author James Hughes' words, how do I fend off the threat of entropy? In what ways is my family different? How do I teach my children that living in a large house doesn't mean we are rich? But that I do believe we are different, and that we expect different things from them?

These worries crystallized last month at my daughter's birthday party when one of her friends asked her mom, "Are they rich," apparently based on our house.

Believe me, these worries keep me up at night. My kids are three and six, too early to be confident that that war has been won.
I would not be anxious about it because all you can do is try to raise your kids right and hope for the best. I have a relative who had a successful business yet lived very modestly. Nobody would have ever suspected how wealthy he was. When the business was sold, his children learned how much he was worth. Well, that was the end of the hard work from the children. Oh, they all had middle-class jobs but did not have money to throw around. They started "borrowing" from the relative to pay for trips, cars, etc. They use the "loans" to live beyond their means and from what I can tell they don't see any need to try to do better on their own. It's not the relative's fault - he raised them right and set a great example. But the siren song of consumerism has swayed the children and they want it all now.
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slug
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Re: Net Worth: Loss of Control Angst

Post by slug »

market timer wrote:
Nathan Drake wrote:Perhaps a better way to look at your net worth is not in the price, but in how many shares you have accumulated. If you're not going to sell your investments for decades, then the current market price is somewhat irrelevant.
I think this is the right idea, but it might be more meaningful to look at expected dividends and interest payments, both of which fluctuate far less than asset prices. A 70/30 portfolio likely has a dividend + interest yield of around 2.4%. So, if you have $500K invested, you're still only receiving about $1000/month in passive income. The latte factor is still somewhat meaningful in relation to this passive income. Think of yourself as worth $1000/month ($33/day), instead of $500K +/- $10K.
I like this thinking too.
Personal Finance Blogger at [b]Sunk Costs are Irrelevant[/b] --> currently on hiatus
sesq
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Re: Net Worth: Loss of Control Angst

Post by sesq »

One thing I do is I project my current retirement assets with a range of real returns, ranging from 1% to 8% (in 1% increments) over 10, 15, 20, 25 year increments. I then compare the resulting number against various withdrawal rates to see different probabilities that my holdings will cover my expected expenses (I assume $4k per month and a paid off house). I then rinse and repeat based on the retirement assets I expect to have in 5 years (like the soviets, I project my net worth out 5 years)

Since I am looking at a matrix of results I am less chasten by the day to day result, and "the number", and more interested in how many scenarios look good (which I shade green on my spreadsheet).
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Re: Net Worth: Loss of Control Angst

Post by jollystomper »

Personally I simply try to focus on the long term trend. The only thing I can control is how much I save and how I choose to allocate what I save. I'm a "slow and steady wins the race" type of investor, and historically the longer ones outlook the better things turn out.

I try not to get too exuberant at market highs, nor do I panic at market lows. It is just a cycle that will always be there. As I have gotten older I roughly followed the rule of reducing equities as you age, but will never get below 45% of my portfolio in equities, it is a risk I'm willing to take.

You have to get comfortable with the fact that with life there are no guarantees (other than death and taxes). That goes with finances, relationships, children, etc. All you can do is try to increase the odds of the outcome. When I was 25 I had no idea that at 55 I'd be on the verge (and based on various calculators already there) of having a net worth that makes me financially independent. I just knew that saving and investing would increase the odds, and while *not* saving.investing would reduce the odds. Same with children. There is a saying that with kids, "more is caught than taught" - what they observe you value is more likely to be what they value, rather than what you tell them you value.
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Re: Net Worth: Loss of Control Angst

Post by VictoriaF »

slug wrote:And somehow now I'm having a crisis... The vast majority of my wealth is tied to 2 things.

My house...
My retirement accounts...
...
I can't tell if it's truly the lack of control or the knowledge that my day to day spending choices are almost irrelevant now. It might be the latter. ... How do I get comfortable with so much of my wealth at the whims of the market?
Control is an illusion. Much of wealth accumulation and wealth loss are due to random factors. Most people don't realize it and wave the thought away if it ever crosses their minds: If they succeed, it's because they were smart, determined, and diligent; if they fail, it's because they fell on bad luck--but this "bad luck" is somehow disjointed from the probabilistically random luck.

In reality, a philosophical approach to control plus common prudence are the best one can hope for.

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)
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