How does this happen?

[Nutria]

That makes sense. It just depends why you're calculating your net worth. Some of us do it using just financial resources - cash, savings, investments. I don't include material goods. I don't include my home either. I'm not planning to sell any of that stuff. Other people include absolutely everything. They want to know basically what their liquidation value is.

So it's okay to include your cars in your net worth.

That's the beauty of spreadsheets: I can give you our total NW, retirement-only, etc, etc, etc.

I'm curious if you include other possessions as well like jewelry, furniture, art, electronics, etc. Those are all things that could be sold for cash.

Just jewelry and house. No furniture, art or electronics worth enough.

[Nutria]

Net worth should be "liquidation value" if you truly want to get a picture of your real net worth.

Is that the same as Fair Market Value?

[parafly]

True, but again, it depends why you're calculating it. For me, the main goal is retirement. I need to know when our assets are sufficient to support us without me working. For that purpose, I don't care how much my car or my wife's engagement ring or the artwork on the walls is worth. We're not going to sell them to pay our bills.

So I do a very simple net worth: financial assets minus liabilities.

I would argue that you are not really calculating your true net worth.

FWIW, my net worth spreadsheet has three different calculations.

1) Net Worth = All assets (including cars, personal items, etc.) - All liabilities
2) Net Investible Assets = Liquid savings + Investments + Retirement
3) Net Liquid Assets = Liquid savings + Investments

This gives you a nice break down of your true net worth from a few different angles.

[Fishindude77]

I would argue that you are not really calculating your true net worth.
Bingo !
And parafly explains it well.

If you don't count the car, house, all of your other items of value, etc. then you are not really calculating your true net worth.

DS is calculating his retirement portfolio.

[disneysteve]

I would argue that you are not really calculating your true net worth.

No need to argue. I agree with you.

I'm calculating more of a functional net worth. I don't care about my liquidation value. My wife and/or daughter can worry about that when I die. I care about my monetary value today. How much money do I have to spend and live on? How much debt do I have? Whether my car is worth $200, $2,000, or $20,000 is of absolutely no significance so I see no need to track it.

[parafly]

No need to argue. I agree with you.

I'm calculating more of a functional net worth. I don't care about my liquidation value. My wife and/or daughter can worry about that when I die. I care about my monetary value today. How much money do I have to spend and live on? How much debt do I have? Whether my car is worth $200, $2,000, or $20,000 is of absolutely no significance so I see no need to track it.

Fair enough.

Do you include your car loan as a liability in your net worth calculation? If so, then you really should be including the value of the car as an asset otherwise you are not painting an accurate picture. Same goes for your house/mortgage.

It all comes down to your personal preference though. These are just numbers describing a financial picture. Whatever works best for you.

[tripods68]

1) Net Worth = All assets (including cars, personal items, etc.) - All liabilities
2) Net Investible Assets = Liquid savings + Investments + Retirement
3) Net Liquid Assets = Liquid savings + Investments

This gives you a nice break down of your true net worth from a few different angles.

While I agree there are few different ways to calculate Net Worth, I use only track 1) above for simplistic practical approach. This way, if I ever need to liquidate an asset immediately (like selling my WRX that I love so much last year) I have some knowledge of the value I own in dollar terms versus what I can sell it for. This include equity on our home at all times. I like to keep records of everything we own versus owed monthly.

[LivingAlmostLarge]

Actually I have more recently mostly people we get a lot of double takes on "quit DH's job and we're living on savings." We're in sabbatical/early retirement. No we have no income. And his program cost us $16k. Most people can't just pay $16k cash when not working. More than one comment because we've said he's doing this course and it cost $X. True cost of the course is the lack of income I would say especially since it's been almost a year.

So from the commentary yes most people we've meet would have trouble paying $16k cash for a course, but not for a car! And more than a few would be living a year off savings, when they say they spent $300k and have nothing to show for it. I have no clue where people's money went.

[Nutria]

So from the commentary yes most people we've meet would have trouble paying $16k cash for a course, but not for a car!

To anyone who's gone to college, a "course" is this thing that lasts 12 weeks and which you take of at the same time. So yes, $16K for a course is pretty shocking ($160K/year tuition ).

Obviously that's not "the course" your husband is taking, but that's what first comes to mind.