Thursday, July 5, 2007

What is Net Worth Worth?

It seems like pretty much a given for personal finance bloggers to provide a net worth, and since I'm a big numbers fan, it was one of the first things that I added to my own site. But trying to calculate it did raise some questions for me about it's real value. Sure it's useful as a yardstick, and if I stay consistent in how I calculate my own it can be a great comparison tool from month to month. But considering all the questions I came up with while I was calculating my own, I'm not sure it's a good way to compare against others. I'd be curious to see what some people decided on the following when calculating their own worth.
  • Does the car count? I chose to include mine because it's newish and represents a good chunk of my assets at this point. Beyond that, on one hand it's a depreciating asset, on the other, if I was in a real crunch I could sell it for some good money. So which way to go? I'm thinking about leaving it while I pay off the loan and getting rid of it once I'm done, but that'll mean a drop.
  • What about other belongings? I didn't think I had anything else quite as valuable and easy to sell, but all of my furniture taken together, for example, might be worth $1000-2000. I chose to leave it out.
  • How do you classify retirement funds that are invested in mutual funds, stocks, etc... are they all lumped under retirement, separated into investment type, or something else?
  • Where do employee stock purchase plan stocks go? They're not really just like "stock" because of the tax implications, if nothing else, but I don't see another good category for them. Also, they accrue for 6 months before a purchase date, so they will cause me to have a bump every 6 months.
  • What do you include under credit card debt? Are revolving balances you pay off every month included? Mine seem to vary a lot so I chose to include only my one revolving balance (it's at a lower APR than my bank account, don't worry).


SF Money Musings said...

I had the same concerns about Networth. Some bloggers include their personal belongings such as clothes and gadgets but aside from my cell phone, DSLR and clothes, most of my stuff isn't of much value. I've had most of my clothes for years. I also didn't count my used car - it's a depreciating asset and it's been through a few accidents.

Nice to see you blogging! I love how thorough you are with each topic! It's really quite inspiring to read about the ROTH IRA one particularly.

SavingDiva said...

I don't include my car because it depreciates, and I think of it as more of a luxury. I don't include any of my other possesions because like sf money musings they're not worth much.

I lump a lot of my stuff together for NetworthIQ. Since they don't really consider taxes (and they just sum up the amounts), I put everything in as best as I can figure. I try to go into more detail in my blog, but I'm sure I leave somem stuff out.