It seems everyone has there own way of calculating their net worth. I am not sure if I should be including some things or not, such as vehicles, home equity, jewelry, household items (big ticket things like TV's), collectables, etc?
What is everyone elses opinion? I did some searching first, but didn't come up with anything.....
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I would include things of significant and determinable value. My watches, guitars, stereo, furniture, etc. aren't worth much on the open market, certainly not worth replacement value, so I'm not likely to sell them except for near starvation purposes.
Home equity, yes, for net worth purposes, but not for portfolio purposes.
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I include financial assets, real estate ($0 for me right now),
I also include cars since they can easily be traded but I depreciate them very fast over 5 years. Our two 7 and 8 yo cars are on the books at under $1k each if I recall properly.
I wouldn't use anything else since I'd be in real financial trouble if I would trade other belongings. And they don't add up to much anyway.
I would also compute an income producing worth including financial assets and if I would have an income producing property I would put it there too.
I keep it simple -- here's a copy of what I track from my "networth.txt file" :
ASSETS
$$$ - house
$$$ - 401k,Roths,IRAs
$$$ - pension (current cash value)
$$$ - vehicle 1
$$$ - vehicle 2
$$$ - emergency fund
$$$ - company stock
DEBTS
$$$ - mortage and/or home equity loan ($0 for past several years, yeah!)
$$$ - credit card balances ($0 finally here too)
ASSETS - DEBTS = Net Worth
I value my vehicles at the price that I could sell them on craigslist. I could do the same for household goods but I just don't think it is worth the bother.
I add a new entry each year and it is rewarding to read back several years to see how far I have come! I particularly noticed an upswing when I finished paying off all debts -- it really does help you grow your net worth more quickly.
One final thing.... Like HFWR, I also track my income producing capabilities separate from net worth and for that calculation I exclude the house and vehicles.
It depends for what purpose and why you are figuring your net worth .For estate tax purposes i would count my home,for a loan a bank would count it.
I prefer not to count a personal residence in net worth for retirement purposes unless i was ready to liquidate it.If i was taking a loan against it i would subtract out the loan though..I wouldnt count it anymore than i would subtract off my net worth my future rent payments if i didnt own a house .A home is a consumption item until the day comes that your no longer consuming it.I have some origonal art work on my walls which i love.I dont count that either .Maybe one day ill want to sell them,at that point i would count it,same goes for jewelry.
I try not to (figure my net worth). I think the more practical approach is to ask yourself what you really want to find out.
If you want to compare with peers, calculate the same way they do. If you want to plan retirement, calculate your spendable retirement assets. (Insert long debate here about whether to add house in net worth for planning retirement.)
Just trying to find the "right" way to calculate your net worth will really frustrate you...it did me, anyway. How do you account for a vested non-COLA pension you can't touch until 55 or 60? Social Security?...heck I've already put in my 40 quarters. These obviously have value for retirement but have no tangible value to me today, and I can't pass them on if I die before I can draw on them. Even my 401(k) and IRA are hard to figure...sure I have a NAV updated for me daily, but if I tried to take it all out tomorrow I would end up with only half of it after taxes.
So instead I just keep patting myself on the back for staying debt free and watching my investments grow. I'm not sure what I'll do during the next dip...maybe I'll start adding in my pension and SS again.
I count what most people here count. Checking, Savings, stocks, 401Ks, Est Home & Vehicle value.
But I also subtract out estimated income tax for the investments that have not been taxed yet.
I don't count cars. I figure I'll always have to replace them, so I can't really sell one to raise cash to live off of (of course I COULD, but I don't intend to). So, for FIRE purposes my NW is:
Savings Accounts
CDs
Brokerage Account
Rollover IRA
401(k) plan
Mentally, I also sometimes add in an estimated value of my future gov't pension, but I don't keep that in a spreadsheet. It does, however, affect my "number".
For overall NW, I add the equity in the house.
I have no other debt.
Karen
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For me: Net Worth = Financial Assets (Cash, Stocks, Bonds, Mutual Funds) + Home Value - Mortgage Balance.
The credit cards get paid every month and I don't really own anything all that valuable other than the house.
Since I don't plan to move except in the most dire of circumstances, a more useful figure for me, and the one that will determine when I retire, is financial assets - mortgage balance.
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