Do you include savings/checking account in net worth?

[imoldernu]

Net Worth on ER, essentially meaningless

Wikipedia
Net worth is the value of all the non-financial and financial assets owned minus the value of all its outstanding liabilities.

Investopedia
Net worth is the amount by which assets exceed liabilities. Another way to say this is, it’s the value of everything you own, minus all your debts.

OECD
Household total net worth is the value of total assets (the total amount of financial assets plus the total amount of non-financial assets.

Since, on ER, this number has no set meaning, any comparison must be taken in context.

When an $800K home is not part of one's net worth, the rest of the items that may or may not be included, is meaningless.
Savings account
Life insurance value
Cars
Realtime inflation/deflation amounts
Net sale differentials... taxes, attorney costs, commissions etc.
Assessed value of antiques, collections
Foreseeable gains/losses.

Naturally, if one's Net Worth exceeds $10M, the perspective of value will differ from the hopeful ER member who is feeling good about having attained a Net Worth of $300K.

The difference extends beyond this, for those of us who look to our net worth as the source of income for our waning days, and those who look to preserve their net worth... using only the investment income to live out their days.

We're all different. Good to know that despite the differences, we can all get along...

 

[Totoro]

I include all except my furniture, clothes and appliances. That's probably less than $1000 in total .. car is included.

SS / pension is excluded. Partially because it is irrelevant (30+ years out) and small.

 

[dunkelblau]

For asset allocation purposes IMO checking and savings belong in the 'cash' category alongside any money market sweep funds or net cash balances in brokerage accounts.

 

[RobLJ]

Yes.

I realize I have a lot of cash in savings (as well as in investments), currently totalling about 14.5%, so ignoring savings in net worth would be foolish.
In the stocks, I've taken some gains the last two years to reduce to a relatively low band of 59%, and although I put some to work in bonds 3-6 months ago when bond yields went up, more recently yields are again scraping bottom.
It takes one click in Quicken to see net worth or broad allocations including all cash in all accounts.

 

[audreyh1]

In the past I haven't included either one. But then I realized that there is over 11k every month between the two, and they are pretty much within 2k of that yearly. So I started including it in my net worth calculations. Am I wrong? What do you do regarding this?

What are you including it for? Is there some calculation you are doing based on your total net worth?

 

[audreyh1]

For asset allocation purposes IMO checking and savings belong in the 'cash' category alongside any money market sweep funds or net cash balances in brokerage accounts.

The OP didn't say anything about asset allocation.

 

[UnrealizedPotential]

What are you including it for? Is there some calculation you are doing based on your total net worth?

Yes, as I get closer to 500k it seemed like a slam dunk to start including it in my calculations. I do not include my car, or clothes and I do not own a home, so just whatever else I have gets included. My savings and checking never had that much in them before, so I never thought much about it. I know that it [savings+checking] is going to be pretty consistent now, so I that is why I added it . 500k for me seems to be a tough nut to crack, but I will get there eventually.

 

[Txtriathelete]

Mint includes them (along with CC balances and house/car valuations) in net worth. But I can't recall a single time I've ever thought about that number other than looking at Mint.

 

[Zona]

Quicken puts everything into net worth, so checking and savings are included, along with our house, mortgage, and rental property. But when I do my "can we retire yet" calculations, I only look at our investment and retirement accounts. And sometimes I add in the rental, as it's paid off and could be sold if needed. But I try to be conservative, so usually only use the investment numbers in firecalc.

 

[Sunset]

Net worth = assets - liabilities

Checking and savings accounts are assets.

Yes, but so are my 43 bic pens and my unused packages of printer paper, at what point do you stop and just decide to calculate a FAKE net worth ?

 

[CaliKid]

I include all assets and all liabilities.

 

[nash031]

No. It's relatively insignificant anyway.

 

[W2R]

What are you including it for? Is there some calculation you are doing based on your total net worth?

Yes, as I get closer to 500k it seemed like a slam dunk to start including it in my calculations. I do not include my car, or clothes and I do not own a home, so just whatever else I have gets included. My savings and checking never had that much in them before, so I never thought much about it. I know that it [savings+checking] is going to be pretty consistent now, so I that is why I added it . 500k for me seems to be a tough nut to crack, but I will get there eventually.

In that case, I'd include savings and checking, especially since you are working towards a personal goal that has been "a tough nut to crack".

 

[big-papa]

For purposes of tracking and deciding when I've finally reached FIRE, no. I'm still working, so it's what pays the bills, is highly variable, and doesn't really accumulate. If it does get too high, I skim from the top and invest. Then I count the part that just got invested.

 

[Jerry1]

If I were to calculate my NW, yes, I would include everything. I wouldn't specifically count every possession in my house, but I'd make some estimate of them for NW. Thing is, I don't really care and don't calculate my NW.

What I do is figure out if I can retire and for that, I look at all investments and cash versus any liabilities. In that process, I don't consider my house or property (possessions). Thankfully, I am also pretty much debt free (monthly credit card balance - always paid off, car loan - zero interest rate).

 

[Dash man]

I count all my accounts and real property. I leave out personal property. I calculate each quarter so I can adjust my spending plan if needed. We do keep a large cash sum in Ally Bank and Synchrony Bank waiting for DW to find that perfect home on the Jersey shore. Also to mitigate against any large market downturns. Whichever comes first.

 

[Spanky]

yes, they are assets whether you want to include it.

 

[euro]

In the past I haven't included either one. But then I realized that there is over 11k every month between the two, and they are pretty much within 2k of that yearly. So I started including it in my net worth calculations. Am I wrong? What do you do regarding this?

Don't really understand the question. Why would you NOT include it?
Beside maybe the fact that, hopefully, it is a very small to negligible portion of your overall portfolio

 

[Meadbh]

Net Worth is an accounting concept and is very clearly defined as Assets minus Liabilities. Since cash in a chequing account is an asset, it should be included.

There is a concept of materiality in managerial accounting. If something is immaterial in the big picture, it is permissible to omit it. So, for example, a decamillionaire who has $100 in a chequing account could argue that the 0.001% of assets in the chequing account is immaterial. OTOH, if one has assets of $500K including $50K in cash, that 10% most certainly is material.

I have several chequing accounts and their total balance is never more than 1% of my NW. I do consider that to be material. My philosophy is to follow accounting definitions and to be consistent.

 

[UnrealizedPotential]

Don't really understand the question. Why would you NOT include it?
Beside maybe the fact that, hopefully, it is a very small to negligible portion of your overall portfolio

Yes, as I said in a previous post, it was a small portion,and IMO, it wasn't worth counting in the past. Now I have a lot more in both, so that is why I started including it.

 

[RunningBum]

With MM rates so low, I've been keeping a pretty large amount in my checking account. For awhile I was getting the same petty interest rate there so why not? At that point I decided it was worth counting the checking account for both net worth (or whatever you want to call it) and as part of my asset allocation calcs.


Re: credit card balances, I pay those monthly so they are transient and small in comparison. Never 5 figures, like my checking account very often is.

 

[sengsational]

Ah, the net worth question. Always spawns a flurry!

 

[Brian from MI]

It's your net worth, heck, include the value of your cat if you want. My point is it's yours. I know about what my net worth is, but let's face it, it's just for me and DW's nice to know list. I can't see, other than comparing to my neighbor's of what value it is.

Completely agree. Well put!

 

[Dog]

Yes I include checking and savings in net worth as we have about three years living expenses there as a cushion. I do not include mortgage-free home, cars or furniture or toys. We pay off credit cards monthly.

 

[Fedup]

Help me understand the reason why one needs to know the exact value of one's net worth? I mean what's the purpose for ? Except to participate in polls online.
Of course I know the strict sense of the accounting term, I was once an accounting major. While we are at it? Determine net worth. Should I add my frequent Miles awards to my net worth too?