I saw a post a few minutes ago inquiring about how to calculate one's net worth and ways to treat different types of assets on your balance sheet. The post went away, but I thought I'd make a new post because I had questions similar to those of the original poster.
I've started preparing a quarterly balance sheet showing my assets and liabilities and net worth. I have been listing the account balance of my taxable accounts and pre-tax accounts without regard to their future tax liabilities. I don't know if this is proper accounting-wise, or that it really matters that much. However, I do know a $100,000 balance in a Roth IRA is worth a lot more today and in the future than $100,000 in a traditional IRA or 401k. 100k in a roth is even worth more than $100k in a taxable account. It seems spending much time computing the potential tax liabilities on your different accounts with varying tax treatments is sort of an overly complicated process. Even your taxable accounts will have built-in capital gains tax liabilities (unless you are doing something wrong...).
I think when ER time gets here, we will have some tax planning flexibility with all our different account types to be able to keep taxes to a minimum.
For pension and accumulated leave, I have been listing my unvested ESOP on my balance sheet, but I tabulate 2 bottom line net worths - one with the unvested ESOP amounts included, and one net worth with unvested balances excluded. I haven't listed my accrued time off, but the value of this is small compared to my total net worth.
Generally speaking, the net worth that I compute is what I could get if I liquidated everything I own over the next few months and got cash for it. I don't include personal property (clothes, electronics, toys, books, furniture, etc.) because the market value for these are small and it would be burdensome to liquidate most of these items.
I also have fairly large student loans with fixed APR's around 1% or so for a 30 year term. The interest payments are also tax deductible and the principal balance is taken care of in the event of my death (so it is like life insurance). I have been toying with listing the amount of these loans as less than the principal balance that I owe, because the loan rate is so low and the other benefits. If I could transfer this liability to someone else like an investor, I'm sure I would be able to pay the transferee significantly less than what the principal balance is. So far I have kept the principal balance as the liability amount because I want to keep a conservative accounting of my net worth.
Do any others have any opinions on the way I have treated my assets or does anyone else do their balance sheet a different way?
I've started preparing a quarterly balance sheet showing my assets and liabilities and net worth. I have been listing the account balance of my taxable accounts and pre-tax accounts without regard to their future tax liabilities. I don't know if this is proper accounting-wise, or that it really matters that much. However, I do know a $100,000 balance in a Roth IRA is worth a lot more today and in the future than $100,000 in a traditional IRA or 401k. 100k in a roth is even worth more than $100k in a taxable account. It seems spending much time computing the potential tax liabilities on your different accounts with varying tax treatments is sort of an overly complicated process. Even your taxable accounts will have built-in capital gains tax liabilities (unless you are doing something wrong...).
I think when ER time gets here, we will have some tax planning flexibility with all our different account types to be able to keep taxes to a minimum.
For pension and accumulated leave, I have been listing my unvested ESOP on my balance sheet, but I tabulate 2 bottom line net worths - one with the unvested ESOP amounts included, and one net worth with unvested balances excluded. I haven't listed my accrued time off, but the value of this is small compared to my total net worth.
Generally speaking, the net worth that I compute is what I could get if I liquidated everything I own over the next few months and got cash for it. I don't include personal property (clothes, electronics, toys, books, furniture, etc.) because the market value for these are small and it would be burdensome to liquidate most of these items.
I also have fairly large student loans with fixed APR's around 1% or so for a 30 year term. The interest payments are also tax deductible and the principal balance is taken care of in the event of my death (so it is like life insurance). I have been toying with listing the amount of these loans as less than the principal balance that I owe, because the loan rate is so low and the other benefits. If I could transfer this liability to someone else like an investor, I'm sure I would be able to pay the transferee significantly less than what the principal balance is. So far I have kept the principal balance as the liability amount because I want to keep a conservative accounting of my net worth.
Do any others have any opinions on the way I have treated my assets or does anyone else do their balance sheet a different way?