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Suppose you bought 100 shares of a stock a year ago at $17 per share, and now the value is at $34 per share. Your investment increased in value by $1,700 during the past year. Although youd be the envy of your friends at the next party if you casually mentioned your investments, the $1,700 of increased value is not really savings.
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Instead, it represents appreciation on your investments, so you must remove this appreciation from the calculations. Just so you know, Im not unfairly penalizing you for your shrewd investments you also get to add back the decline in value of your less-successful investments.If all this calculating gives you a headache, you get stuck, or you just hate crunching numbers, try the intuitive, seat-of-the-pants approach Save a regular portion of your monthly income.