Judge Your Personal Finances Like A Company Would!
If you do any investing or follow the stock market at all, you will often hear a company report its earnings every quarter and also every year. Often investors are looking for a couple of indicators including revenue and net income.
I started wondering if I could judge myself the same way. So here is a base effort, to be updated once numbers are final for 2006:
Revenue - My base salary increased 9% from where it was at the beginning of the year. Once I do my tax return, I'll have a better idea of what my other revenue was including: bonuses, capital gains, interest and dividend income. I'll post an update once this is done. I also have to add my fiance's results into this.
Analysis: While 9% is not bad, I felt I could have done better. I imagine my final revenue number will actually be about 11% higher than the previous year. When setting goals this year, I would like to see this number increase by 15% or more next year.
Net Income - I don't know my own net income, but my fiance and I started the year with a combined net worth of $34,514. As of November 30th we are at $102,480. So our net income for the year was $67,966. We don't have any numbers from 2005 to compare to. But as a percentage of net worth, our net worth increased by 197%.
Analysis: I'm extremely pleased with this part of our financial picture. This was a big year for us. I think if a real company reported net income numbers like this, they would be rewarded by getting a bump in their stock price.
posted by Please Read @ 8:51 AM
9 comments
9 Comments:
That is absolutely astounding! Congrats on such a dramatic increase in your net worth. I think I need to pay closer attention to how you invest and the tips you write about, maybe that way I'll be able to pay for the wedding AND save some money.
That is an amazing increase in your networth. Was this just a great year, or do you expect a big increase next year as well?
Matt - Thanks!
Money - I anticipate 2007 won't be as good. We are going to shell out $30k for our wedding, but I still think we'll squeak out an increase of 20k - 30k or so.
We'll just have to see. We are focused now and we have a lot of stuff on cruise control, so hopefully the net worth keeps rising.
Isn't net income different from net worth? Net income is on the income statement and is your revenues minus expenses. Net worth is on the balance statement and is your assets minus liabilities.
Anon - You are correct, but the difference between your net worth at the beginning of the year and your net worth at the end of the year, will equal your net income for the year.
Sorry, I read your post too fast, so my previous comment may not be exactly on point, but what you are referring to as net income I think is retained earnings. Or maybe it's just a dumb question that has me confused, but on company statements, do they add the net income to last year's equity?
anon - You are correct again. Company's add net income to prior year equity to get current year equity.
So for me, I'm doing the same thing. My year end net worth (equity) minus my beginning of the year net worth (beginning equity) equals my net income.
I must say the only way to increase it by $67k in a year is great.
But I'm wondering if at least a portion of this is due to purchase of a house or car.
Otherwise, unless you 2 put $50k away this year, you purchased some outrageously fantastic stocks.
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