"These figures do not include domestic sales," Pauline said. "Now with the studio albums, you're still enjoying a steady stream of sales but nothing dramatic. In Action, however, is selling like hotcakes all across the country. It's been out for less than six months now and it's coming up on triple platinum domestically. People love it. And though Crow would never admit it, one of the main reasons for the high sales is the three previously unrecorded tunes you put on there. The radio stations are playing all three of them to death, especially This Life We Live and Life Of Toil. Both of those have been the most requested tunes in the nation for twelve straight weeks now."
"What about the video of In Action?" Jake asked. "How's that doing?"
"Pretty well," Pauline said. "I think we're being hamstrung a little by the fact that people can just go into a store and rent the video, but sales have topped nine hundred thousand as of this morning."
"Sweet," Jake said.
"And that," Jill said, "coupled with the endorsement fee you got from Gibson Guitars at the start of the tour, minus the money you've spent of late on things like airplanes and loans to flight schools and cars and living the good life abroad, has pushed your net worth into the vicinity of $3.4 million. I have the exact figure here if you're..."
"No, that's cool," Jake said. "So I'm still a rich bastard, right?"
"Well... you're rich, Jake," Jill told him. "That is true, but you're not quite as rich as you seem to think you are."
"What do you mean?" Jake asked her.
"Not all of that net worth is immediately liquid, you understand? A good chunk of it is in this house you own and in your other assets like your vehicles, your furnishings, your car, and your musical instrument collection. That Les Paul guitar you have, for instance, is worth nearly thirty thousand dollars alone. At least that's what it's insured for. Your wine collection is worth seventy-two thousand dollars."
"I understand," Jake said. "What's my house worth these days?"
"The house is now appraised at $1.1 million, but that is just a sterile figure based on comparable sales in the neighborhood. In reality, you could easily get a million and a half, maybe even as much as $1.7 million simply because this is Jake Kingsley's house. The fact that you own it and lived in it increases its value."
"So you're saying that one point five million of that three point four of my net worth is this house alone?" Jake asked.
"No," she said. "The figure I used to represent the value of your house in your total net worth is not what the house is worth, but how much equity you have in it. If you were to liquefy this particular asset, you would still have to pay the bank what you owe them. The equity is the difference between what you owe and how much you could sell the house for."
"I know what equity is," Jake said, irritated. "I'm not a complete idiot on financial matters."
"I'm sorry," Jill said. "I wasn't trying to be insulting."
"It's okay," Jake said. "So how much equity do I have in the house?"
"It's a considerable amount," she told him. "You originally purchased it for $850.000. You put down twenty percent and financed the rest, which was $683,235 — that includes the closing costs, of course."
"Of course," Jake said.
"Per your instructions, I've been paying double the required amount on the mortgage each month. That was a good move. The extra $4400.50 I pay each month goes directly to reducing the principal. So, in the twenty-six months since escrow closed, those extra payments reduced the principal by $114,413. The regular mortgage payments are, unfortunately, going mostly to interest at this stage of the game, but they reduced the principal another $11,212."
Jake's head was starting to spin from all the figures being thrown at him. "Okay, so what's the bottom line?" he asked.
"The bottom line is that the remaining principal on your loan is $557,610. That is how much you would have to pay the bank if you sold the house. Since the house is worth approximately $1.5 million, that means you have $942,390 in equity."
"So, you're saying like a quarter of my net worth is represented by this house?"
"Twenty-eight percent, actually," Jill said, "but, in general, yes, that's the point I'm trying to make. In addition to the twenty-eight percent for the house, another eight percent is represented by your personal belongings — your car, your airplane, your guitars, your clothes, the paintings on your wall, your wine collection — anything that you actually own that is not part of the house if it were sold. It all adds up to roughly $272,000."
"I have $272,000 worth of shit?" Jake asked, surprised at the amount.
"That is correct," she said. "So what we're looking at is that a full thirty-six percent of your net worth is composed of real estate and personal property. This means that $1,224,000 of that $3.4 million I mentioned is money that cannot be spent at all because it resides in property. The only way to tap into it is to sell the property in question. And of the $2.8 million that remains, $1.1 million of it is invested in the stock market."
"$1.1 million?" Jake asked. "I thought I only authorized you to invest thirty percent of my free and clear income there."
"Jake," Pauline said, "that is how much she invests. She's picked some very good stocks for you. You're getting well over a twenty percent return on that investment."
"Really?" Jake asked.
"Don't you pay attention when I go over your investment portfolio with you?" Jill asked him, exasperated.
"Well... yeah... but... you know."
"I've got you heavily invested in Microsoft, Intel, IBM, and several other technology stocks that have gone through the roof since the start of this personal computer craze. Of course, the bulk of the stock investments are in the S&P 500, which is a relatively safe investment with good long term return potential, otherwise your overall stock return would have been closer to forty percent."
"Wow," Jake said. He was only vaguely aware of what the S&P 500 actually was. "Am I paying you enough?"
"We'll get to that later," Jill said. "So you have $1.1 million invested in stocks and growing quite nicely there, thank you very much. Another $500,000 is tied up in various tax shelters I've set up for you — the windmill project, some overseas investment, monthly support obligations to those charities you picked for me, donation obligations to the Heritage Philharmonic and the CSUH and the Heritage Community College music departments. The rest of your money, which equals about $1.2 million, currently, is your actual spending money. I keep it mostly in treasury bills, treasury notes, and certificates of deposit for safe holding. I keep $100,000 in your personal bank account and replenish it from the CDs as you spend. I also keep another account open to pay for all of your monthly obligations. These obligations are your mortgage, Elsa's salary, my salary, your household grocery and alcohol budget, the loan payments and other recurring expenses involving your airplane, your car insurance, your health insurance, your property tax, your utilities, your gardening and pool service, and various other recurring debts. As of this moment, the monthly outgoing amount from this account is $21,200."
Jake whistled. "That is a lot," he admitted.
"It's $254,000 a year," Jill told him. "And yes, it is a lot. Like with your personal spending account, I replenish the recurring obligations account once a month from the CDs and adjust the amount as you acquire new obligations."
"Okay," Jake said, not quite sure where she was going with this.
He soon found out. "My point to this whole discussion is to talk about your personal spending," Jill said. "Now that you have a breakdown of your outgoing obligations and where your money is actually stored, I'm hoping that maybe you'll think twice before making some of these purchases you make."
"You mean like the car?" Jake asked.
"The car, the luxury hotels abroad, the first class air travel all over the European continent, the sixteen thousand dollars worth of French wine, the twenty thousand dollar check you wrote to Helen's father for that down payment on a new plane, the eighteen thousand dollar Lear Jet charters. These are the things that are going to get you into trouble, Jake. You're eating pretty heavily into your liquid assets. Do you know how much you spent out of your personal account last year?"