Year-end portfolio review

[disneysteve]

I know this isn't what you asked disneysteve, but net worth increased 7.9%.

What do you include in your net worth calculation? Do you include your home? Your cars? Other physical assets - art, collectibles, etc? Or are you strictly looking at financial assets like stocks, bonds, mutual funds, etc?

[scfr]

What do you include in your net worth calculation? Do you include your home? Your cars? Other physical assets - art, collectibles, etc? Or are you strictly looking at financial assets like stocks, bonds, mutual funds, etc?

Yes, of course house and cars are included because they are part of net worth. I believe net worth is the most realistic snapshot of financial health. However, if you wish to speak only of financial assets (which may be what you mean by "portfolio"), then change year-end to year-end was +9.6%. Non-financial assets (house & car) were almost flat, because decrease in cars' values nearly offset increase in house value.

[BuckyBadger]

I don't include depreciating assets such as cars in my calculation of net worth.

And I don't add on anything for my house potentially increasing in value since it is not an investment - it is just a nice place to live.

[KTP]

Net worth should be calculated on a premise that you were to sell everything in a 3 month period and move to Costa Rica or some such location with just a suitcase of clothes.

Cars, houses, cats, anything you won't be taking with you.

Any other calculation isn't net worth, but you can do it if it makes you feel good.

[scfr]

Net worth should be calculated on a premise that you were to sell everything in a 3 month period and move to Costa Rica or some such location with just a suitcase of clothes.

Cars, houses, cats, anything you won't be taking with you.

Any other calculation isn't net worth, but you can do it if it makes you feel good.

Using this logic, I will assume you do not include any debts in your net worth calculation since moving to Costa Rica would include walking away from those?

Feel free to use whatever calculation you wish to even if it runs counter to all definitions of net worth from the financial experts.

If "portfolio" is defined as financial assets, then no, non-financial assets are not included. However, when speaking of net worth, they are.

[KTP]

Using this logic, I will assume you do not include any debts in your net worth calculation since moving to Costa Rica would include walking away from those?

Feel free to use whatever calculation you wish to even if it runs counter to all definitions of net worth from the financial experts.

Nonsense. You pay your debts if you have any. You can't escape them by moving...they will freeze your accounts on a court order.

http://www.investopedia.com/terms/n/networth.asp

"Definition of 'Net Worth'

The amount by which assets exceed liabilities."

[KTP]

Using this logic, I will assume you do not include any debts in your net worth calculation since moving to Costa Rica would include walking away from those?

Feel free to use whatever calculation you wish to even if it runs counter to all definitions of net worth from the financial experts.

If "portfolio" is defined as financial assets, then no, non-financial assets are not included. However, when speaking of net worth, they are.

when did I mention portfolio? I was responding to the above poster who does not include all assets in calculating net worth.

[scfr]

when did I mention portfolio? I was responding to the above poster who does not include all assets in calculating net worth.

The question from OP (disneysteve) was about portfolio. Although it was not defined, from subsequent comments I assume he (disneysteve) was referring to financial assets. In my original comment, I mentioned that I calculated year-end net worth as I feel it is a better snapshot of financial health. Net worth and financial assets are not the same thing.

[KTP]

The question from OP (disneysteve) was about portfolio. Although it was not defined, from subsequent comments I assume he (disneysteve) was referring to financial assets. In my original comment, I mentioned that I calculated year-end net worth as I feel it is a better snapshot of financial health. Net worth and financial assets are not the same thing.

The previous two posts above mine were discussing net worth and how you calculate it.

I also disagree that financial assets should not take in consideration things like homes and cars. A car is used to aid in financial transactions (getting to the bank, buying groceries). It is true that it depreciates (usually, unless it is a collector item) but there are plenty of financial assets that depreciate. Suppose that you took a cab to work every day at $10 each way. This costs you $600 a month. It was a wise choice for you vs buying a car, because you save on the original car cost (plus gas and maintenance). If you keep the $36,000 you will need for cab fares during the next five years in the bank, do you count this in your financial portfolio or do you set it aside as a car expense? If someone else buys a car for $24,000 and has $12,000 in fuel and maintenance expenses over the next five years, are they not in the exact same financial position? By your calculation they have $24,000 less in financial net worth even though at the end of five years, they will actually be in slightly better shape assuming they get some residual value for the car.

[Joe Moore]

That is the way to go. Last year was too expensive for me. I just could not cut the costs. When you cannot cut the living costs even you make good money it all disappears. I need to learn frugal living. Sell the timeshare and change the car are some of the things in my to do list.

It was a great year for me. My net worth went from $280k to $416k, so it's up almost 49%.

• I paid off two auto loans
• Reduced my insurance cost by $75/month
• Reduced my electricity bill by 15%, just by being more conscious of my usage
• Sold my gas guzzling pick up truck and bought a station wagon
• Started a taxable brokerage account after maxing my retirement accounts

But I failed at implementing budgeting software. I tried YNAB, but I didn't like spending the time required to log every transaction in. I'm not too concerned about tracking every penny, because I have been bringing my expenses down in many different areas.

[BuckyBadger]

Net worth should be calculated on a premise that you were to sell everything in a 3 month period and move to Costa Rica or some such location with just a suitcase of clothes.

Cars, houses, cats, anything you won't be taking with you.

Any other calculation isn't net worth, but you can do it if it makes you feel good.

Well, using your method would make me about $75,000 better off, so I wouldn't say that "my way" makes me feel "better," but I consider it more realistic. I probably have another $75,000 worth of stuff in my house that I could sell, but I don't include my flat screen in my net worth. I don't include my engagement ring, either.

You say that net worth "should be" calculated one way. Who says your way is more correct that mine? I include assets that I could get my hands on quickly - in case, say, my husband is kidnapped and I need to come up with a ransom.

As I said, I don't include assets that are generally considered to be depreciating - such as our cars or the stuff in our house.

And I'm fairly sure that I wouldn't get any money for our menagerie of rescue mutts and kitties. How much to you add to your net worth for the sale of your cat?

I prefer to be conservative when calculating these sorts of things. Better than erring on the other side, in my opinion.

[autoxer]

As I said, I don't include assets that are generally considered to be depreciating - such as our cars or the stuff in our house.

A depreciating asset is still an asset. I could easily sell my car and free up $15k of equity. To keep it accurate, I occasionally check KBB and lower my valuation to what it would actually sell for. The rest of my stuff I consider fully depreciated, including the dog.

[BuckyBadger]

A depreciating asset is still an asset. I could easily sell my car and free up $15k of equity. To keep it accurate, I occasionally check KBB and lower my valuation to what it would actually sell for. The rest of my stuff I consider fully depreciated, including the dog.

So this is all semantics - we draw our lines at different depreciating assets. I choose not to include my cars. You choose to include them. Neither of us includes our televisions.

I take issue not with how a person determines his or her net worth, rather I take issue with someone telling me that I'm doing it wrong.

I choose to do it conservatively. That doesn't mean that I'm "doin' it wrong."

[KTP]

I include assets that I could get my hands on quickly - in case, say, my husband is kidnapped and I need to come up with a ransom.

Bingo! There you go. Last time I sold a car on craigslist it was a total of 6 hours from placing the ad until I had cash in my hand. Do you think that if my wife were kidnapped and they were asking $200,000 but I only had $190,000 and a car blue booked at $15,000 I would not try to get at least $10,000 for it on craigslist?

Anything you own that you can sell in a reasonable amount of time is part of your net worth.


Now there is some legitimate debate over including the future value of annuities like SS or pensions in one's net worth. Those are quite a bit harder to calculate.

[disneysteve]

A depreciating asset is still an asset. I could easily sell my car and free up $15k of equity.

True, but I could say the same thing about my wife's diamond engagement and wedding rings, other jewelry, electronics, collectibles, etc. I could get a few hundred for each of our 3 iPhones. A couple hundred more for the iPad. Probably 50 bucks for the lawnmower. A couple hundred for our bikes. Where do you draw the line?

I choose to do it conservatively. That doesn't mean that I'm "doin' it wrong."

Agreed. I track only our financial assets: cash, stocks, bonds, mutual funds. I don't worry about all of the other stuff. I'm not planning to sell any of it and assigning value is very difficult. I know exactly what all of our financial assets are worth on any given day.