RunningBum
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Jun 18, 2007
- Messages
- 13,274
The more rigid the definition, the less useful it is in real life.
Please don't take it personally.
I was just pointing out that there is often great amusement here when people start quibbling over what they want net worth to mean.
As you can see already.
See, I think it is just the opposite. The more rigid, the more useful, because everyone understands it equally as opposed to their personal definition of it.The more rigid the definition, the less useful it is in real life.
Whoa there Pilgrim! I beg to disagree. Sort of.......
One's pension is an income producing "Phantom" asset. But, it is real. We just don't know how to evaluate it.
Suppose one has a pension of $1000 a month for life. The pensioner lives for 5 years and collects $60,000. So, that pension could be said to have the value of aprox $56,600 assuming it earns 3% a year, no inflation adjustments and is zeroed out after the 5 years.
OTOH, if our pensioner lives 35 more years with the same assumptions, the pension has a phantom value of over $265,000.
Just because we don't know the pension's value until death, doesn't mean it doesn't have a value, IMHO.
Perhaps an accountant can tell us what the official accounting rules say about pensions.
Pension income should be looked at as part of cash flow and not a defined asset included in net worth, unless it has a lump sum option that can be defined.
So should my future stock and bond dividends be included in my net worth calculation?
Perhaps an accountant can tell us what the official accounting rules say about pensions.
no, they are baked into the price of the security
I agree they should not be included, but they are not "baked" in over the long term, 3-6 months maybe, but the market reevaluates with every earnings release.
...in relation to other factors like interest rates, credit rating, etc.bond prices are directly related to the coupon payment
The more rigid the definition, the less useful it is in real life.
Depends on what personal "asset" you're talking about
See, I think it is just the opposite. The more rigid, the more useful, because everyone understands it equally as opposed to their personal definition of it.
I think what is getting lost here is that people jump to what they do with their net worth and then it becomes a discussion of the application and management of assets and no longer about a singular measure at a single point in time.
But in my opinion you've come up with a standard definition of net worth that really doesn't have a very practical meaning other than to be able to compare things. Now we know how many oranges we each have, but I also have a lot of apples, and I happen to like apples better than oranges, so I don't really care that you have a couple more oranges than me.
But in my opinion you've come up with a standard definition of net worth that really doesn't have a very practical meaning other than to be able to compare things. Now we know how many oranges we each have, but I also have a lot of apples, and I happen to like apples better than oranges, so I don't really care that you have a couple more oranges than me.
Bingo! I feel like we hit a breakthrough moment. If we can agree on this point, then I am happy to begin to discuss how we can all achieve the best cash flow to retire on happily ever after.
Like we're ever going to agree on what "retire" means....
Like we're ever going to agree on what "retire" means....
So should my future stock and bond dividends be included in my net worth calculation?
Net worth is a simple calculation: assets - liabilities. Pension income should be looked at as part of cash flow and not a defined asset included in net worth, unless it has a lump sum option that can be defined.
Should I include future dividend payments in my net worth calculation, no. See the point?
Not in my opinion, but the assets that produce them should be counted..