Calculating your net worth

[BUM]

Justin,

I like your balance sheet approach to determining net worth. I've been doing the same thing for years. I value my real estate by estimating its conservative selling price.

As far as misc. items goes, I use the "fish bones" approach and account only for significant items, i.e. Account for your classic car but not the gas in the tank, change in the ashtray, the fuzzy dice. Watch the big stuff.

I think the smallest item I track is the cash value of my whole life policy. I also update 1/4'ly.

 

[cute fuzzy bunny]

Crap. I account for lawnmower oil and gas...

 

[Ginger]

Every December. I go through all our statements, stock valuations, assets, etc. and do a complete Financial Statement.  I have a form that I fill out on our computer.   A simple process.   I think once a year is sufficient to get an overview of where we are financially.  Trying to keep it simple ---

 

[dm]

Ive been tracking mine since 1998. I track my retirement holdings, taxable portfolio, cars, and house. I havn't been showing any gain on the house but since I use to have a mortgage I used my purchase price and then tracked my mortgage being reduced. I update mine very often. It has helped me over the years to reach goals. How would you know if you could ER if you don't know where your at?

 

[Newell]

I only use net worth when dealing with estate planning. Other than that, if the asset doesn't produce income, it's of little interest.

 

[maddythebeagle]

I think the Millionaire Next Door indicates that if your net worth is over 2x(age x income)/10 then you are where you should be as an accumulator of weath. This should include your home equity in this calc. It's more an indicator if you are a saving enough for your level of income. Not if you have wealth enough to retire.

As for FIRE planning, I think home equity should be considered only as not having a mortgage or rent. I suppose you could tap it and get money or move to a smaller house or cheaper area.

I personally wouldnt deduct capital gains off of my stock investments because I dont plan to sell a lot (rather will be taking in dividend income from them). I also wouldnt worry about taking off taxes from your tax deffered investments since there is an assumption that this money will grow tax defferred until it is taken out (my assumption would be that the taxes would be paid for in the compounding over the years). Taking the taxes out right now in my calcs. doesnt make sense. On the pensions, I assume that I will live a certain number of years (like to use avg. lifespan numbers).

 

[ShokWaveRider]

I agree with that NOT "??" guy! Your net worth is exactly that, Yours! Calculate it how you like.

Personally I count only cash or cash equivelents. Oh and yes the house counts. I personally do not count the car(s) or household items, but thats me. If I was going to count a car, boat, plane etc. I would count them at 50% of what YOU think they are worth.

SWR

 

[Mr._johngalt]

I agree with that NOT "??" guy! Your net worth is exactly that, Yours! Calculate it how you like.

Personally I count only cash or cash equivelents. Oh and yes the house counts. I personally do not count the car(s) or household items, but thats me. If I was going to count a car, boat, plane etc. I would count them at 50% of what YOU think they are worth.

SWR

I count paper clips, envelopes and pancake batter. Not the dogs though.
They should be deducted as current liabilities. My rule is:
Anything you can sell should go in at the estimated (net) selling price.

JG

 

[cute fuzzy bunny]

See how this differs? My dogs count as home security. I dont have to worry about locking my doors. Anchovy farts in alaska or a neighbor drops the newspaper after they pick it up and these suckers are at the door sounding like they're gonna kill someone. Right after they lick em and see if they have any food or are willing to rub their tummies that is.

 

[Sillysal]

This may only be useful to you if you are applying for a loan, which I doubt many ERs are doing....

At my bank, we have people fill out balance sheets with supporting schedules. Assets are listed at FMV in order of liquidity. Liabilities are listed at current balance, with consumer-type loans (CC, Auto, etc) first, then real estate loans, then business-type loans. Schedules provide information such as cost of assets and date of acquisition, so we can determine if their FMV is reasonable. Liabilities schedules show committed amounts on lines of credit, and maturity dates and payments. If closely held businesses are listed, they would generally be shown by stating the owners share of equity, with a supporting BS of the company.