Back for another check-in on my finances! Prepare yourself — this entry comes with a startling revelation! (Dun, dun, DUN!)
Change: $1,561 or +4.86%
A nice continuous climb for that little line! If you look at the chart, you may notice that it’s up into the area that was the first “fall” in the chart back in 2007, when I went back to school and started taking out student loans again. But, this is where the “startling revelation” comes in…
The growth on this chart is a lie. Or, an exaggeration, anyway. And I call this a startling revelation because it really did take me by surprise, as well. It’s something I knew about, but completely underestimated until I looked at the numbers this month.
You see, I’ve been counting in my net worth the money I’ve been putting aside for taxes. As a freelancer and independent contractor, my taxes and Social Security tax payments are not withheld by an employer — I have to put them aside myself and pay it at tax time. I do pay “estimated quarterly taxes,” each quarter, but by my calculations, that amount is much lower than what I’ll really owe come tax day. I won’t be penalized because I’ve been making my quarterly payments, but… I will have to hand over a significant chunk of change.
So this chart’s growth is inflated because of the savings account I have specifically for tax savings. Which leads us to an excellent question: why did I ever include that savings account in these monthly calculations at all?
Good question. I don’t really know. I guess I thought that it wouldn’t be as big of an impact as it was. I didn’t expect to be working as a freelancer and independent contractor for so long. It was really just an oversight. However, it’s not completely wrong — after all, once I make the big payment in March or so, my net worth will drop down to what it’s supposed to be. It will all adjust at that time.
And as soon as it does adjust? At that time, if I’m still getting income from a non-W2-source, I’ll cut that savings account out of the calculation entirely.
Just be prepared for the big drop in six months or so. Believe me, I’m getting prepared for that, myself.
If you have any questions about my net worth or how it is calculated, feel free to ask them in the comments. Also, if you’d like to see how I stack up against other personal finance bloggers, be sure to check out The Wealthy Blogger List. (Spoiler alert: the name of my site is highly accurate.)