In the middle of the Great Recession, I wondered if we would ever break even, much less have a positive net worth. With negative equity in the home we foolishly nabbed during the height of the housing bubble and a retirement account that was worth half as much, we felt lost.
When I read articles about Gen Xers who feel like they will never catch up, I could relate. One recent article pointed out how many of us in the middle class are still fighting to get back to even after the Great Recession. The article said the median household income fell 1.5 percent to about $50,000, which is adjusted for inflation. Even though I had to adjust our spending due to a pay cut last year, we have been fortunate enough to bounce back.
Achieving equity in our home
After having negative equity in our home for the past 5 out of 7 years that we owned it, we finally achieved some equity. A recent appraisal showed our home is worth $130,000. Since we owe about $104,000, that means I can add $26,000 on the positive side of the assets side of the net worth equation. We were able to increase our equity by paying down our mortgage balance. The actual appraised value of our home went down by about $50,000 compared to when we bought it.
Looking at our liabilities
At this time, our only liability is a car loan for $9,000. However, I'm not sure that I would include it as a liability since we could sell it for more than $9,000. For the purpose of figuring out our net worth, I called it even since we could sell our 1-year-old car for at least that much money.
Calculating our retirement savings
Our net worth was pathetic during the recession since our retirement accounts reflected the diminished returns on our investments after the stock market crash. However, we tried our best to invest while the stock market was down despite the psychological torment of it all. Now, we have $135,000 saved for retirement, which brings our net worth up to $161,000.
Beefing up our emergency fund
Unfortunately, we had to deplete much of our emergency fund due to pay cuts and unexpected expenses since the recession. Our emergency fund is down to only $5,000, but that brings our grand total to $166,000. Our total net worth has increased from the negative territory to more $166,000 in the past 5 years. Our current goal is to increase our net worth by saving more for emergencies while staying out of credit card debt.
Most of my close friends say they are overwhelmed by their credit card debt due to the recession. One friend hopes to be able to pay off her debt in a few years after she sells an investment property. In the meanwhile, she is just treading water by paying the minimum balance. I know we are still behind when it comes to having enough in our emergency account and saved for retirement, but we are on the right path.
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