Measuring Net Worth

[NW-Bound]

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Please note that the OP was asking about comparing or benchmarking your networth against your peers.

It's not just about knowing what you have.

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[PandaBear]

I consider net worth in the traditional sense (assets minus liabilities) but I’m pretty sure I’ve never figured out the actual number at any specific point in time.

We have a high value house (paid off) because we live in a HCOL area. Our retirement funds are low for what we will spend because we have 2 pensions that I think are pretty good. But I don’t think that the pensions themselves can count in net worth.

So any number I generate is kind of meaningless.

 

[Dtail]

I don't really use net worth for much of anything other than making myself feel good.

I include all assets and liabilities, including home value... but not the imputed value of my defined benefit pension or social security... and not deferred income taxes on tax-deferred assets even though I know that technically* deferred income taxes should be included.

* like if I was doing a personal financial statement for a bank or other creditor.

+1

 

[FlaGator]

When working, benchmarking was helpful for me to ensure I was keeping savings cranked up. Doesn’t matter now. more interested in making sure what I have lasts to the end

 

[Scratchy]

I have a google finance sheet which updates automatically from ticker symbols and calculates:

Net worth: Assets including zillow value of home (I have no liabilities).

Liquid net worth: Assets excluding home

Post tax liquid net worth: Liquid net worth after discounting capital gains by 27 % and retirement accounts by 31 % for expected taxes. (This is an estimate of money I can actually spend.

Estate value: Net worth discounting retirement accounts by 30 % for expected taxes my heirs might pay. (This is an estimate of money my heirs might expect to have to spend if I died.)

 

[audreyh1]

Quicken tracks it for me automatically. The only real asset in Quicken is our house, and that is not a major component and changes little.

It also includes credit card liabilities as I download transactions.

 

[audreyh1]

I have a google finance sheet which updates automatically from ticker symbols and calculates:

Net worth: Assets including zillow value of home (I have no liabilities).

Don’t you use credit cards?

 

[Floridaman10]

I track NW in Quicken going back to ‘87. Very fun to watch it go up, down-not so much. I track All assets minus liabilities. Except SS. I have a lot of equity appreciation that will be taxed one day in both tax deferred and taxable accounts. I wonder if I am fooling myself because the tax bite will be large.

Just make sure for comparisons that you are using the same definitions.

 

[DrRoy]

Net worth is the household assets (and liabilities) - including the house.

Net Investible Assets is what I use for financial planning.

+1. I do take interest in where we stack up compared to those of similar age in the US, but that is not relevant to how I manage or use the $.

 

[ShokWaveRider]

I use what Quicken tells me, but basically it is...………..

The Value of crap you own +cash Minus the value of crap you owe.

Seriously we do not include cars, furniture, art, antiques, jewelry etc., or anyTHINGs that we own other than our home. I think it has to be stuff that can easily be liquidated. A home is one thing that sometimes defies that rule. Also people sometimes think their home is worth more than it really is, (Guilty here too) as it is worth more to them.

 

[donheff]

I don't really use net worth for much of anything other than making myself feel good.

I include all assets and liabilities, including home value... but not the imputed value of my defined benefit pension or social security... and not deferred income taxes on tax-deferred assets even though I know that technically* deferred income taxes should be included.

* like if I was doing a personal financial statement for a bank or other creditor.

+1 I do exactly this and for the same reason.

 

[steelyman]

I don't really use net worth for much of anything other than making myself feel good.

I’m the same way. Although I do remember, back in the first half of 2009, generating (with Quicken) a cost basis vs current value graph for my retirement portfolio, all in IRA/403(b)/457 accounts. I guess “under water” might be a way to describe it. That didn’t make me feel good a-tall.

Fortunately, that didn’t last!

 

[mrfeh]

Holy smokes...yet another thread about the definition of net worth.

 

[ERD50]

>>>

Please note that the OP was asking about comparing or benchmarking your networth against your peers.

It's not just about knowing what you have.

>>>

If my definition of "my peers" is "anyone with the same net worth as I have", the question answers itself!

-ERD50

 

[gwraigty]

Not me. Living in HCOL area, home value becomes a disproportionate chunk that you can’t spend and can’t eat.

I don't live in a HCOL area, but I agree that our residence shouldn't be included in our calculations to determine our overall financial situation. Every month I update a spreadsheet with our account balances, YTD investment income, and estimated investment income over the next 12 months, all taken from the monthly statements. I have some of that info linked to another spreadsheet that includes YTD deposits from DH's net pay and YTD spending (not categorized). I can see at a glance our aggregate financial picture.

 

[retire202052]

I tend to follow this calculation. It makes sense to me.

https://www.sapling.com/12011834/factor-pension-net-worth

 

[Rianne]

The only reason I consider SS and pension is for long term care. I don't consider it today's dollars or as a asset now. We do not have a LTC policy. When all is entered in FIREcalc, those future earnings are considered to give the long term outlook. We can easily afford LTC with our pension and SS benefits + the portfolio as FIREcalc estimates future earnings. I understand, NW is a point in time, like today and will be different tomorrow. But the overall goal is to plan for the future. NW is irrelevant.

 

[Niuatoputapu]

I don't use Net Worth for anything. As this discussion demonstrates, people use different definitions of the term, so comparisons with others would be challenging. But if I were to calculate, I would use:

Investments and cash (Fido, VG, etc. balances)

plus probable House disposal value (Market Value, less mortgage, less estimated selling commission)

Less any other debt

Equal Net assets before income taxes

Less estimated income taxes on tax-deferred investments

Equal Net Assets

 

[HenryD]

I measure my net worth against against some simple ratios published in the book "Your Money Ratios" (YMR) by Charles Farrel, although I'm sure he didn't invent the concept. The basic premise is that if you have X times your salary at age Y you are doing a "good enough" job of accumulating, with X increasing as you age. I understand the flaws of using salary rather than projected retirement expenses, and that this is aimed at traditional retirement, but it's one tool in the box.

Turning the calculation around I back out a "YMR salary" based on my net worth and age. If the salary is less than what I make I'm behind, if it's more I'm ahead. Prior to my divorce my YMR salary was way ahead of what I was actually making, so I was ahead. Five years later and remarried it's way behind our combined income, but as I project our savings goals out to our FIRE date the YMR salary should be higher than it ever was.

 

[Gumby]

>>>

Please note that the OP was asking about comparing or benchmarking your networth against your peers.

It's not just about knowing what you have.

>>>

If you absolutely must compare yourself to others and you live in the U.S., the Census Bureau can help with that. Download the Excel spreadsheet found here.

https://www.census.gov/data/tables/2016/demo/wealth/wealth-asset-ownership.html

I personally find it to be a fool's errand. There will always be many people with both more and less than I have. The only relevant question is whether I have as much as I need, and the net worth of other people cannot possibly answer that question.

 

[pacergal]

I calculate net worth like I learned in my college accounting classes and how we did it in business in preparing the balance sheet.

Net worth = total assets minus total liabilities. A snapshot at a specific point in time.

It’s a simple as that. So yes, the house is included. A balance sheet can be prepared for an individual, a household, a company - any entity that has defined assets and liabilities.

Pension, income, ss has nothing to do with the balance sheet. Those are income statement items.

+1, same here.
I only check net worth maybe once yearly, if even that.
How I compare with peers is not that important to me.

 

[Andre1969]

This might be sloppy accounting on my part, but I don't really pay attention to my net worth. The only figure I really pay attention to is investible assets (401k, IRAs, after tax mutual funds, online brokerage, checking account, etc).

I do have equity in the house, as I put 25% down. But, I figure that doesn't really do me much good in the short term, as it's not money I can easily live off of. I'd have to either take out an HELOC, refinance and take cash out, or sell the house and downsize.

When I've run my FireCalc predictions in the past, I'd run two sets of numbers. One would presume full SS benefit, for whatever given year I retire. The other would presume NO SS benefit at all. That might be a bit catastrophic, as I'm sure SS will be there, just perhaps not full benefit. But according to the scenarios I've run the difference between full SS and no SS is usually only 2-3 years. For instance, assuming no cuts to SS, and I start claiming benefits at 62, FireCalc says I could retire now, at age 49, on $75K per year with a 94.9% chance of success. With no SS benefit at all, I'd have to wait until age 51 (93.9%) or 52 (96.9%) to get a similar chance of success.

 

[brett]

Net worth did not play a significant part in our decision to FIRE.

We saw no point in adding up the value of our home, automobiles, etc. Had our plan been to sell our home in order to fund our retirement the calculation would have changed.

Our focus was on income stream, ie pensions, and our equity base that provided passive income. All adjusted for after tax, inflation, and changes in lifestyle.

 

[Ronstar]

This might be sloppy accounting on my part, but I don't really pay attention to my net worth. The only figure I really pay attention to is investible assets (401k, IRAs, after tax mutual funds, online brokerage, checking account, etc).

+1. Not sloppy accounting IMO. I never compute my net worth anymore. I used to give the bank a personal financial statement with net worth in order to get business financing, putting in estimated numbers for house, etc. But what's the point in figuring a net worth based on estimates?

IMO, the only number that matters is the investible assets.

 

[NW-Bound]

>>>

Please note that the OP was asking about comparing or benchmarking your networth against your peers.

It's not just about knowing what you have.

>>>

If my definition of "my peers" is "anyone with the same net worth as I have", the question answers itself!

-ERD50

Knowing what is possible can be helpful. Some years ago I had a free subscription of Money Magazine. I found personal stories interesting. For example, there was a doctor who made $200K in that pre-2000 time, yet he and his wife spent all that he made, and he had no savings.

For people with more modest income, if they learn that someone with the same paycheck can manage to retire early, perhaps they will not say that it is impossible.

Again, the range of net worth is huge for people making the same income, or in the same occupation. I think I am not doing too badly for my circumstances. Of course I still want more because it feels good.