How do YOU figure your Net Worth

[uncledrz]

I also don't count items which are not income producing. So when I compute net worth I do not include house, cars, furniture, equiptment, art, toys, etc.

The result is that I have a pretty good idea of the income that can be produced from the assets.

The other figure, including everything that could be sold and turned into cash, but which I will not sell or would only exhcange (read a house, for example) is for the taxman, the banker, etc., but not for me.

I do have problem putting a value on investment real estate, should I look at sale value or income producing value, so I just put that in a separate catagory.

[saluki9]

Originally Posted by tio z

I do have problem putting a value on investment real estate, should I look at sale value or income producing value, so I just put that in a separate catagory.

I value my investment RE using a simple cap rate. I calculate what I consider an appropriate cap rate and divide it into my annual income to come up with a value.

[glock35ipsc]

Thanks for all the replys! My first though was to include anything of significant value that could be turned into cash if needed. Take my firearms collection, that is in the low 5 figure range. I also have shop equipment (personal) that exceeds 5 figures.

I will probably include our house, basically due to the fact that we know we want to sell when we retire. The house is large, 4800 sq/ft on two floors and a fully finished basement, and once the kiddos are gone, we will have no need for the extra space. And since I don't have the best knees in the world, I don't want to be climbing stairs to go to bed. We will either buy/build a small ranch style somewhere close to home, and we have also been discussing lately (alot actually!) about the possibility of moving to Panama or somewhere similar that welcomes ex-pats.

[Meadbh]

Net worth = Assets - Liabilities

A home is an asset and the equity in it should certainly be included.

Here is a link to an Excel spreadsheet designed for Canadians. The principles are the same anywhere.

http://www.buildingwealth.ca/Persona...e/NetWorth.cfm

[Helen]

I only keep track of my retirement investments. I personally don't see a value in determining my net worth. Financial indepence is my goal.

[Zipper]

Keeping track of your net worth is very important. It should be done at least yearly.

Net worth begins slowly but should increase steadily, even in retirement. Meadbh has linked an excellent program.

I think one of the main reasons for paying off a mortgage asap is the buffer it provides if the portfolio goes wonky for a couple of years. (2000-2002). Or if house values actually decline, your equity can't go negative.

Your RE or portfolio can take a beating but one usually offsets the other.

If you find your net worth is dropping then you will have to make adjustments.

[azanon]

Assets - Liabilities. The only non-cash assets I track are my house and cars and they are priced at FMV. I track house and cars because they are so significant in value and can be relatively easily liquidated at FMV. All loans are included too.

[mathjak107]

theres a big difference between can be liquidated and will be liquidated in my mind when it comes to cars and homes.

i dont count anything thats a consumption item until im no longer consuming it.

[azanon]

Originally Posted by mathjak107

theres a big difference between can be liquidated and will be liquidated in my mind when it comes to cars and homes.

i dont count anything thats a consumption item until im no longer consuming it.

There is a difference between those two things, but the question at hand is net worth. What are you worth, asked loosely. If you own a 200K dollar house, and someone asks you or was interested in what are you worth, you wouldnt include that?

I guess one can do pretty much anything in a calculation, including net worth, the only question is how accurate would it be. I leave out my owned furniture so i guess by definition, mine has some mild inaccuracies, but i dont see a few thousand at most as mattering that much. But a house? Yes, of course that is included.

BTW, houses thought of as consumption items is so Kioyaski. If i'm consuming it, then why 1. is it still there. 2. going up in value

Fortunately, the issue for me in quicken is mostly mute anyway. Quicken divides up assets into cash, investments, and property and debt, and adds the three together to determine "net worth". So, if i wanted to know just my (cash) investment net worth, the figure is there. Regardless, we certainly have quicken's opinion on what net worth is, which is pretty much how I defined it.

[FinanceDude]

Originally Posted by Azanon

Assets - Liabilities. The only non-cash assets I track are my house and cars and they are priced at FMV. I track house and cars because they are so significant in value and can be relatively easily liquidated at FMV. All loans are included too.

FMV for a car is often inflated by folks. I price mine at wholesale, because if you trade it in, that's all you're getting anyway..........

[justin]

I guess age is a factor in determining what is important to include in net worth. For many of us Young Dreamers, our houses, cars, etc. are substantial portions of our net worths since we don't have the seven figure portfolios (yet!) to dwarf our other assets. And many of us have a large chunk in the "debt" column (mortgages, car loans, student loans, etc).

Once you're debt-free and have substantial assets outside of your house and cars, those two aren't a significant part of your net worth.

For me, I need some way to track debt reduction, since that is as important to my FIRE goals as acquiring a sizeable portfolio.

[rs0460a]

Originally Posted by justin

Once you're debt-free and have substantial assets outside of your house and cars, those two aren't a significant part of your net worth.

Exactly!

- Ron

[azanon]

Originally Posted by FinanceDude

FMV for a car is often inflated by folks. I price mine at wholesale, because if you trade it in, that's all you're getting anyway..........

Perhaps, but i just sold my Nissan240sx for exactly how i had it valued. I don't price at wholesale because I dont trade my cars in (anymore). Its just too easy to sell on ebay at private party value.

I use Kelly Blue Book to value my car.

I have no interest at all in overvaluing either my house or my car. I'm far more interested in my figure being accurate than inflated.

[azanon]

Originally Posted by justin

I guess age is a factor in determining what is important to include in net worth. For many of us Young Dreamers, our houses, cars, etc. are substantial portions of our net worths since we don't have the seven figure portfolios (yet!) to dwarf our other assets. And many of us have a large chunk in the "debt" column (mortgages, car loans, student loans, etc).

Once you're debt-free and have substantial assets outside of your house and cars, those two aren't a significant part of your net worth.

For me, I need some way to track debt reduction, since that is as important to my FIRE goals as acquiring a sizeable portfolio.

The day I can characterize my house as not even being a significant part of what i'm worth, is the day I know for fact i dont own enough house.

Now to be fair, what's significant to someone is certainly a matter of opinion. I could be worth 3 million in cash, and i'd still consider a house valued at 200K as significant; certainly significant enough to be counted! My dad's worth 3 million cash, and i have no doubt at all he would characterize $200,000 dollars as a significant amount of money! Warren Buffet could maybe call that amount insignificant, but certainly no average millionairre could (IMO).

[justin]

Originally Posted by Azanon

I have no interest at all in overvaluing either my house or my car. I'm far more interested in my figure being accurate than inflated.

Same here! And I figure even if I'm off by $1000 per car, does it really matter? I'm mostly looking at change in net worth over time, so if I consistently have that extra $1000-2000 in my net worth figure, the change in net worth over time will at least be correct. And I get to see how the car is depreciating over time. I don't really care if the car is worth $7000 wholesale or $8000 retail when I have $100k's of other assets that are included in my net worth calcs.

[justin]

Originally Posted by Azanon

The day I can characterize my house as not even being a significant part of what i'm worth, is the day I know for fact i dont own enough house.

Now to be fair, what's significant to someone is certainly a matter of opinion. I could be worth 3 million in cash, and i'd still consider a house valued at 200K as significant; certainly significant enough to be counted! My dad's worth 3 million cash, and i have no doubt at all he would characterize $200,000 dollars as a significant amount of money! Warren Buffet could maybe call that amount insignificant, but certainly no average millionairre could (IMO).

What I meant by "significant part" or "substantial portion" of net worth was merely that as the investment portfolio size increases and the house+car value stays relatively flat, the house+car value becomes increasingly insignificant, expressed as a percentage of net worth. I'm not arguing that a $200k house or a $20k car is insignificant in and of itself, but rather expressed as a percentage of net worth, it is a rather small percentage for most of the FIRE'd folks (based on the recent poll on house value vs. net worth, where many folks were in the 20% or less bracket).

Right now, my house+cars are equal to approximately 100% of my net worth (I'm 26). I anticipate by the time I'm FIRE'd, my house+cars value will drop to ~10% of my net worth. If I omit the house+cars from my net worth calculation today, my net worth changes dramatically. If I were to omit the house+cars value from my net worth calc after reaching FIRE, the change in net worth would not be substantial (greater than 20%).

[FinanceDude]

Originally Posted by justin

Same here! And I figure even if I'm off by $1000 per car, does it really matter? I'm mostly looking at change in net worth over time, so if I consistently have that extra $1000-2000 in my net worth figure, the change in net worth over time will at least be correct. And I get to see how the car is depreciating over time. I don't really care if the car is worth $7000 wholesale or $8000 retail when I have $100k's of other assets that are included in my net worth calcs.

I think it's pretty easy to do the average American's net worth, OUTSIDE of this board:

Assets: House $200,000
Cars 30,000
401Ka 75000
IRA's 0
Total: $305,000

Liabilities: Mortgage: $170000
HELOC: 45,000
Credit cards: 16,000
Dept store CC: 11,500
Auto Loans: 25,000

Total: $267.500

Net Worth: $37,500..................and probably late 30's to early 40's........... :P

[rs0460a]

Originally Posted by Azanon

The day I can characterize my house as not even being a significant part of what i'm worth, is the day I know for fact i dont own enough house.

Well, being that this discussion is in "Young Dreamers" I understand your quandary. As an "oldster", 4.5 months away from retirement, I can tell you that "some day" your home will be secondary to your "retirement pot" (or at least it should be.)

I'm not at an age that I need "stuff" (been there - done that). What I need are the "basics" to make me happy. In my case, it's the following:
- A good marriage/partner to share my "life journey" (for me/DW, passed our 37th anniversary, this year).
- Family/friends that will accept who you are, and "what you are all about"
- Something in your life that "makes you happy" (other than your family/friends). For me, it's my dogs.
- A place that you find "comfortable" and can call home (yes, I/DW have that, even though we could "afford" much, much more). The only thing is, it won't affect our "happiness factor" .

In your "accumulation years" you will strive for more, better, etc (nothing wrong with that, for that time of life). When it is time to "smell the roses/coffee", I hope you can find "peace" with what you have accumulated/achieved in life (I know I have).

I don't need a "bigger home" to make me happy - I,m blessed with what I have...

- Ron

[OkieTexan]

Originally Posted by Ron'Da

In your "accumulation years" you will strive for more, better, etc (nothing wrong with that, for that time of life). When it is time to "smell the roses/coffee", I hope you can find "peace" with what you have accumulated/achieved in life (I know I have).

I don't need a "bigger home" to make me happy - I,m blessed with what I have..

I cannot say it better than this!

This thread:

http://early-retirement.org/forums/i...?topic=10781.0

has a pretty good discussion about how many of us include the house in the NW and why.