Measuring Net Worth

Networth is a number you can use to compare with your friends, so you know who is richer. Just a joke.
I am only interested in my investible assets, which I record at the end of every month to see my progress. I could easily add the value of my paid-off house, which did not seem to have changed in 13 years.
 
I track net worth to define what will be left when we liquidate our holdings for the heirs, including charities. It has been growing every year for the last ten after all living expenses.

We also use it to make advances on inheritances.
 
Gumby said:
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.
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Exactly right. I know that I have more than I need, but less than what I want. I don't need to know about my neighbors or my friends.

I do compare my progress with the S&P and some other benchmarks. You have to, if you are an active investor.
 
Gumby said:
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.
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Thanks for the link... I couldn't find it. A matter of curiosity. Not being in the first percentile, I wondered what the median net worth was for people my age, and that money doesn't have the same meaning as it did when I retired. 31 years ago, my salary was $48K... That seems low compared to today's values. While still not really high, adjusted for inflation that would now be $120K.

A second part of that Government Census page, is particularly interesting to me, as it gives some insight into "where" the net worth lies.
So.... where is the net worth?
House
Bank
Annuity
College savings
Vehicles
Cash Value Life Insurance
Real Estate
Ownership of business
Checking account
Stock Market
Rentals
Bonds
IRA
Jewelry/Marketable items, coin or stamp collection etc.

It's when the net worth is broken down and compared to the statistics that providess some insight into the what and why. Net worth doesn't necessarily translate into liquidity. For instance.... savings for a few students further education could easily be many thousands of dollars, that won't be there at retirement age.

Personally, I found the "by age" part of the chart to be most interesting, not just for the median net worth part, but for some of the other major assets... ie. house... LTC, annuity.

It would be interesting to see how the $1,000,000 theoretical amount required to retire, would be broken down by asset class.

A little different from just looking at personal net worth totals on a periodic basis. :)
 
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NW-Bound said:
I know that I have more than I need, but less than what I want. I don't need to know about my neighbors or my friends.

I do compare my progress with the S&P and some other benchmarks. You have to, if you are an active investor.
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Since I have some low earning investments, like a rental that is not appreciating rapidly, and some CD's , I don't even try to see what I'm getting vs S&P.

I do calculate net worth each year, and it's nice to see it's been rising faster than inflation, which is my main concern to have more spending than last year.
 
The comparison has to be on the total return basis, meaning the rental income must be included (minus expenses), and not just the appraised value of the property.

I never bother to include the value of my 2 homes. They cost me money, and do not appreciate all that much.

I look at the number at the bottom left of my Quicken screen, which sums up all of my liquid accounts, from the checking account to the HSA, various brokerage accounts, 401k's and IRAs, and Treasury Direct accounts. It's all there. I don't have to do any work to know exactly what I have.
 
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As others have said, "net worth" = assets minus liabilities, by definition.

My financial spreadsheet shows the marital "Net Worth" (including the home), and it shows the "Net Investable Assets", which is much more useful in determining potential RE income. I find it useful to track both, as it gives me an idea of the distribution of household value versus retirement assets to be used for income. In the future, a condo will be sold, and another purchased. If the new property is more expensive, then the ratio of NIA to NAV changes, and there's less NIA to tap for expenses. Part of the pie.

While I don't have college savings plans, I wouldn't count those in either of the above, as the money is not yours to spend (if it's for the kids). I also don't count pensions or SS, as they're monthly income, and you don't have them until you file.
 
i use liquid assets ( the share portfolio + availbale cash ) minus liabilities .

the properties are worth whatever i sell them for , BUT i have no intention of selling them so the income goes into the cash part and the costs in the liabilities part .

i don't need to impress anyone ( and so i am still single ) nor look rich , so less likely to be mugged , or conned , or married , and don't like parties much ( except to stay in a corner and study human behaviour ) so don't normally get invited ( so i have plenty of reseaech and education time )

i would rather just move towards doubling my current liquid assets , than calculate a running total

boring but true

the government makes regular estimates of my net worth , and that helps keep somone in a pointless job ( distorting GDP figures ) , they seem to care more than i do
 
While it's interesting to compare to various statistical groups, it's sort of boring and, if anything, just a bit of an egotistical indulgence... I'm sure most of us are, or will be, in the very top tier regardless of how you parse the data.


I track my net worth against my expenses. Now that I'm arguably FI and planning to quit next year (still terrifying) I find my interest is on my expenses more than my assets as controlling my expenses has now become the biggest factor in my FI journey.
 
Offgrid Organic Farmer said:
Net Worth is Assets minus liabilities.


Gender has no bearing on Net Worth.
Household size has no bearing on the conversation.
Age has nothing to do with it.
Education is not a factor.
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All of those are factors associated with financial net worth.
 
target2019 said:
All of those are factors associated with financial net worth.
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I believe that OOF is saying only that those factors don't change the calculation of net worth being equal to assets minus liabilities. I agree. Although those factors almost certainly do affect both the relative size and type of one's assets and liabilities, they don't change the way net worth is measured.
 
I have always called it Net Worth, but really what I calculate should be called "retirement worth" and includes most assets minus liabilities.

I exclude those things that cannot be liquidated to live on....such as personal belongings/cars. As for the house, it's a bit tricky. I figure someday we will downsize to a smaller house and net about $100k out of that...so I count the $100k.

I don't have any defined benefit pensions, and I don't count SS since it could be reduced or taken away by tax law changes.

What I use this number for is a rough estimate of how much we can spend annually in FIRE using the 4% guideline....very rough estimate.
 
I've been thinking more about this issue, and it appears to me that a key reason why I am currently FIRED is because my net worth has never been negative. Since the day I left home at the age of 18 with 20 bucks in my pocket, it has scraped very close to zero a few times, but never went negative. (I think the lowest was 28 cents.) It helped that I never had a credit card until after I got married at age 25.

Debt is the first boulder in the path to FIRE. If you can avoid that, more than half the battle has been won.
 
Gumby said:
I've been thinking more about this issue, and it appears to me that a key reason why I am currently FIRED is because my net worth has never been negative. Since the day I left home at the age of 18 with 20 bucks in my pocket, it has scraped very close to zero a few times, but never went negative. (I think the lowest was 28 cents.) It helped that I never had a credit card until after I got married at age 25.

Debt is the first boulder in the path to FIRE. If you can avoid that, more than half the battle has been won.
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Don't think I ever had a negative net worth either although it scraped pretty close to zero my final semester of law school. (We saved for a few years before I went and paid cash.)
 
NW = Assets - Liabilities.

I am not like most of this forum with spread sheets all over the place. Every once in a while I do a ball park in my head.

My main concerning is generating income during retirement. I am (rather nervously) shifting assets around to prepare for that including transferring pre-tax IRAs into the 401k in the preparation for the back-door Roth.

At this point, I am not going to have much of an option when to retire due to health and family issues. I will have to conform our spending to our income. (We should not starve.)
 
For me Net Worth is just a number for fun. I include all Real Estate, cash, retirement accounts and a ballpark number for personal property. I don't include Social Security, pensions and annuities. I do not use this number for any financial planning.
 
Health is no where in the formula for net worth but without it, net worth is just a number you cant use. A friend of mine worked until 70. His wife died last year. He recently was diagnosed with lung cancer at 71 yo a year after retiring. He's now on hospice care and not expected to live much longer. he told me before this diagnosis that his nw went up 600k since 1/1/19.
MarieIG said:
NW = Assets - Liabilities.

I am not like most of this forum with spread sheets all over the place. Every once in a while I do a ball park in my head.

My main concerning is generating income during retirement. I am (rather nervously) shifting assets around to prepare for that including transferring pre-tax IRAs into the 401k in the preparation for the back-door Roth.

At this point, I am not going to have much of an option when to retire due to health and family issues. I will have to conform our spending to our income. (We should not starve.)
Click to expand...
 
The main reason I track my net worth (quarterly or so) is to see whether my pile is keeping up with inflation since I retired. If it is, I’m well ahead of the game, IMO. If it isn’t - well, I’m allowed to draw down some over my lifetime. I just keep an eye on it.

I really don’t care about anyone else’s net worth.
 
ER2B said:
Health is no where in the formula for net worth but without it, net worth is just a number you cant use. A friend of mine worked until 70. His wife died last year. He recently was diagnosed with lung cancer at 71 yo a year after retiring. He's now on hospice care and not expected to live much longer. he told me before this diagnosis that his nw went up 600k since 1/1/19.
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That's the saddest thing I've heard in a long time.
 
Never had a negative net worth either.
 
RobbieB said:
Never had a negative net worth either.
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Haven’t been negative for many years, coinciding, shockingly enough, with divorce.

My net worth is relatively easy to determine: IRA balance + home equity covers probably 95%.
 
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