CreditKarma Survey Findings

[karen1972]

Net Worth is just one factor in financial health. Cash flow and asset mix to me are just as important.

Doesn't really matter if you are 59 and zero net worth if you have a pension plus social security which covers all your expenses with plenty left over (I'm sure my uncle is one of those zero net worth people, but he had a mill job which is paying him a good pension) My mom on the other hand is asset rich, cash poor.

 

[Retired Expat]

Your Net worth is meaningful as a way of keeping score, hopefully it is growing and most importantly it might be important for your heirs. It is meaningless mostly as a financial planning tool however, and folks give it too much weight.

Knew a guy who a few years before he died lamented his Net Worth was almost zero as he had no money in the bank and lost all this holdings in the stock market fall of 2008/9. Wanted to go to an Assisted living place but couldn't afford it. Pretty sad right? I was able to help him rent out his luxury apartment for alot of money and pay all his bills. Was sitting on almost 10 million in property but was totally cash poor and he thought his Net Worth was zero.....

However he had bought some art that he asked me to sell and was sure they were worth 100"s of thousands of dollars because they had been appraised for that for insurance purposes years before. Sold for mere pennys on the dollar at auction.

Word to the wise, when looking at Net Worth don't include any of your personal possessions. Your furniture which you spent a fortune on, the Jewelry and collectibles all may be worth nothing or pennies on the dollar from what you think

 

[Sunset]

For me , net worth high enough made me realize I could retire, as I don't get any pension and wouldn't want to live off SS by itself.

I track it because I like to know the value, and of course if it went to zero, I'd have to go to work.

 

[yakers]

Net worth is mostly important to me for estate planning.

 

[COcheesehead]

Word to the wise, when looking at Net Worth don't include any of your personal possessions. Your furniture which you spent a fortune on, the Jewelry and collectibles all may be worth nothing or pennies on the dollar from what you think

I agree to a point. I don’t include furniture or kitchen things, stuff like that, but I do include items I know we can sell and occasionally do sell: photographic equipment, bikes, a wine collection, precious metal jewelry, musical instruments. We even flip name brand sportswear on eBay when we are done with it. The key is to know the value and know where you can turn things into cash easily. These items add tens of thousands to our net worth and I track them annually.

 

[Al18]

I think net worth is helpful during your working life, when deciding how much to spend and how much to save. You can see what a drag your mortgage is on your overall net worth, and gives you some incentive to pay it off quicker. My savings rate really increased once the mortgage was paid off.

 

[CRLLS]

I think net worth is helpful during your working life, when deciding how much to spend and how much to save. You can see what a drag your mortgage is on your overall net worth, and gives you some incentive to pay it off quicker. My savings rate really increased once the mortgage was paid off.

A budget was the device I used rather than Net Worth. I included a line for savings in the spending side. If cashflow would not support the budget, then income and/or income needed to be addressed. Net Worth rises and falls with the investments. Not so much, income or expenses.

 

[CRLLS]

I agree to a point. I don’t include furniture or kitchen things, stuff like that, but I do include items I know we can sell and occasionally do sell: photographic equipment, bikes, a wine collection, precious metal jewelry, musical instruments. We even flip name brand sportswear on eBay when we are done with it. The key is to know the value and know where you can turn things into cash easily. These items add tens of thousands to our net worth and I track them annually.

Key to knowing the value is to know how to market/sell it. If one is using Net Worth for an estate valuation, then one should readjust the value of such items as those who are liquidating may not have the knowledge or timeframe to get the higher fair market value. When MIL passed there was only a couple of thousand in personal items sold in her estate sale. I'm sure that given an unlimited amount of time or other means of selling that could easily have doubled, tripled or even gone higher.

 

[ERD50]

I think net worth is helpful during your working life, when deciding how much to spend and how much to save. ...

I don't get that at all. I want to save the max, while maintaining a 'quality of life'. Spend money only on things of value to you, and the sooner you become FI.

... You can see what a drag your mortgage is on your overall net worth, and gives you some incentive to pay it off quicker. My savings rate really increased once the mortgage was paid off.

I sense fuzzy math here. Paying off the mortgage is just transferring money from one account to another. No real NW delta.

If you didn't have the mortgage, that money would have to come out of your assets. You'd have less "saved" (in $ in that account). So 'increasing savings rate once the mortgage is paid off' is just refilling the bucket you emptied to put into your house.

Pay off or not, you decide. But don't try to lay no fuzzy math on me!

If you disagree, illustrate with real numbers. Thanks.

-ERD50

 

[rmorris50]

Your NW is critical as it funds your cash flow. So understanding your NW asset composition, risk profile and degree of leverage is absolutely critical to understanding the impact your to cash flow and liquidity profile, and how to manage your assets. Just ask the banks that went under. It’s much more that just summing up market values to get a NW dollar amount.

 

[ERD50]

Your NW is critical as it funds your cash flow. So understanding your NW asset composition, risk profile and degree of leverage is absolutely critical to understanding the impact your to cash flow and liquidity profile, and how to manage your assets. Just ask the banks that went under. It’s much more that just summing up market values to get a NW dollar amount.

How so?

If I own a $10M home, fully paid off (so therefore an 'asset' with no mortgage 'liability' so all in the NW calculation), how does that "fund my cash flow"? It's likely a cash flow sink.

-ERD50

 

[rmorris50]

It can produce CF you’re just chosing not to do so

 

[CRLLS]

It can produce CF you’re just chosing not to do so

I don't think you fully understand the term cashflow.

 

[aja8888]

How so?

If I own a $10M home, fully paid off (so therefore an 'asset' with no mortgage 'liability' so all in the NW calculation), how does that "fund my cash flow"? It's likely a cash flow sink.

-ERD50

Exaxtly.

Unless you rent it out and generate a cash flow (income), it is a cash sink due to you having to pay taxes, insurance and upkeep on it (outgo).

This is very basic stuff here!

 

[rmorris50]

I don't think you fully understand the term cashflow.

You think wrong. If I have a million dollar paid for house, I could assume in my retirement projection I move to a little apt or or second home and rent out the million dollar home. I could get a HELOC or reverse mortgage.

I understand most people chose to assume their house can’t produce cash flow, but that’s an assumption and choice, not a given.

 

[CRLLS]

You think wrong. If I have a million dollar paid for house, I could assume in my retirement projection I move to a little apt or or second home and rent out the million dollar home. I could get a HELOC or reverse mortgage.

I understand most people chose to assume their house can’t produce cash flow, but that’s an assumption and choice, not a given.

WADR, You are confusing cash flow with liquid assets or cash reserves.

 

[rmorris50]

WADR, You are confusing cash flow with liquid assets or cash reserves.

I understood difference just as well as you. But you also understand a house can be managed such that it results in cash flow even though a house in and of itself isn’t literally cash.

 

[Al18]

I don't get that at all. I want to save the max, while maintaining a 'quality of life'. Spend money only on things of value to you, and the sooner you become FI.




I sense fuzzy math here. Paying off the mortgage is just transferring money from one account to another. No real NW delta.

If you didn't have the mortgage, that money would have to come out of your assets. You'd have less "saved" (in $ in that account). So 'increasing savings rate once the mortgage is paid off' is just refilling the bucket you emptied to put into your house.

Pay off or not, you decide. But don't try to lay no fuzzy math on me!

If you disagree, illustrate with real numbers. Thanks.

-ERD50

I'm stating my opinion - if you don't like it, I don't care.

 

[CRLLS]

I understood difference just as well as you. But you also understand a house can be managed such that it results in cash flow even though a house in and of itself isn’t literally cash.

Yes, the selling or renting of a home could be shown in a cash flow statement. Until you actually convert assets to cash, there is no "FLOW" therefore, not part of cash flow. That's why it is called Cash Flow. Therefore, your initial statement "Your NW is critical as it funds your cash flow" is [-]wrong[/-] less than accurate. The only thing that funds cash flow is actually receiving cash.

 

[rmorris50]

Yes, the selling or renting of a home could be shown in a cash flow statement. Until you actually convert assets to cash, there is no "FLOW" therefore, not part of cash flow. That's why it is called Cash Flow. Therefore, your initial statement "Your NW is critical as it funds your cash flow" is [-]wrong[/-] less than accurate. The only thing that funds cash flow is actually receiving cash.

Haha how pedantic. But yes your NW is a potential source of cash flow, depending how you choose manage your assets, including your house. Which makes it even MORE critical to include your house and all assets in your NW, as it can provide you with the broadest thinking and choices of how to eventually produce cash flow.

 

[ERD50]

I'm stating my opinion - if you don't like it, I don't care.

The definition of words in this context are not a matter of opinion. That's why we have words.

If you had simply said your home could be used as a source of cash flow, instead of "Your NW is critical as it funds your cash flow.", no one would question it. But the same could be said of my car, my tools, etc. There is no direct relation to NW.

-ERD50

 

[rmorris50]

The definition of words in this context are not a matter of opinion. That's why we have words.

If you had simply said your home could be used as a source of cash flow, instead of "Your NW is critical as it funds your cash flow.", no one would question it. But the same could be said of my car, my tools, etc. There is no direct relation to NW.

-ERD50

Again, pedantic. But thank you for clarifying my post for others.

 

[retiredtillwepart]

I read all the postings it is sad so many go forth with good educations and have very little instruction on Personal Finance. We need to direct this sad commentary towards our elementary, high schools and colleges.

 

[luckydude]

Your NW is critical as it funds your cash flow. So understanding your NW asset composition, risk profile and degree of leverage is absolutely critical to understanding the impact your to cash flow and liquidity profile, and how to manage your assets. Just ask the banks that went under. It’s much more that just summing up market values to get a NW dollar amount.

NW has nothing to do with cashflow because certain assets simply cannot generate cash flow.

For example, DW and I inherited some valuable artworks. They are a nice line item in our NW but they generate zero cash flow (and in fact cost us money to insure and store).

Another example: DW and I own some gold. They are a line item in our NW but they generate zero cash flow.

One more example: DW and I own a nice plot of buildable lot on the coast with 180 degree clifftop ocean views. It's a valuable property and looks great on our NW, but generates zero cash flow and in fact costs us money in property tax, insurance and maintenance.

I get that some real estate can be mortgaged/leased/rented out to generate income, but then you'll have to structure it just right to make sure that the resulting income more than offsets the property tax/interest payment/insurance/maintenance you'll have to pay (not the mention the hassles of dealing with tenants and navigating local rental laws and regulations). Sounds great in theory but getting the execution right is quite another matter, and I certainly wouldn't recommend this as cashflow generating strategy for primary residence (as you suggested in a post up thread).

FWIW---DW and I own multiple land, residential properties, rural properties and shares in industrial properties + alternative (cashflow negative) assets, so I'm speaking from extensive experience.

 

[COcheesehead]

People are confusing cashflow and liquidity.