January Update: The Problem With Tracking Net Worth

I guess I don´t know how to do it.
I got right to it with my resolutions this year.  I set up my direct deposit to put 1% of my pay into the savings accounts of two needy children I know.  Feeling good about that.
Then I sat down to calculate my net worth for the first time ever.  Well, I updated my debts, and that was pretty easy, except I factored in Michael´s student loans which we haven´t started paying yet, and two 401k loans, whose repayment comes straight out of my paycheck each month.  I don´t normally factor these in because I never see the money I would have had if I didn´t have to pay them.  Also, the interest I´m paying on those goes back into my own account, so… yeah.  They don´t trouble me like everything else does.
And so, because this was one of my resolutions, here I am naked transparent:

BALANCE DEBT APR
ugg tia 54.46%
$1,142.97 gas card 24.99%
$297.54 CC1 21.99%
$185.49 mom´s CC 19.99%
$2,912.80 CC2 18.90%
$439.88 checking overages 18.00%
$5,192.34 CC3 16.99%
$7,483.73 CC4 9.25%
$8,633.17 car 5.89%
$5,250.00 unsub2 4.66%
$10,157.59 401k 1 4.43%
$7,159.77 401k 2 4.42%
$3,500.00 sub 3.86%
$6,000.00 unsub1 3.86%
$2,456.03 IRS 3.00%
$60,811.31  TOTAL
But then I set about to calculating my assets.
I know how much I have in my 401k and my savings, but then what?  For our cars, do we use what we paid for them or how much we could sell them for now?  Well, we looked up the Kelley Blue Book values for our cars.  Kind of depressing considering how much we paid for them.
Then I listed the things I know we own that are expensive.  Computers, gaming consoles and video games, jewelry, piano, books.  But again we were faced with, how do you put a price tag on these?  By instinct we started adding up what we paid for them.  It´s easy to remember what we paid for our computers, all our gaming, jewelry, etc.
I added it all up and our assets were around $41,000.  Sadly almost $20,000 negative Net Worth.
But then I realized, we should do either purchase value or resale value for all categories across the board, right?  And when we changed our cars to what we purchased them for (as opposed to what they could sell for) so that it would match everything else we had categorized, and we had a huge Net Worth upswing to the positive side.
VALUE
$33,705.26 401k
$25,000.00 ch car
$13,000.00 m car
$10,000.00 video games
$10,000.00 jewelry
$2,600.00 computers
$2,200.00 gaming consoles
$2,000.00 household stuff
$2,000.00 books
$1,000.35 tuition savings
$1,000.00 piano
$493.18 emergency savings
$67,800.35 TOTAL
This way our net worth is positive.  $5,481 to be exact.  We debated if we should be calculating using the figures we´d insure (purchase values) or the value “of our estate” were we to die (also purchase values) or if we´d use the numbers as if we had to sell it all right now, how much would we get (resale value).  We´re definitely still thinking about how to do this in a way that the Net Worth number will mean something to us.  And considering that, I think for the sake of thinking about my money, it´s easier to say “this is how much I spent on things that I now own on one side, and this is how much I owe on the other side.”
But I want to know from you, fellow friends, how do you do it, specifically?  Am I all wrong here?  Maybe I should stick to just debt tracking.  And then I got to thinking… What about including inheritance?  Like all my mom´s assets–when she passes–will be mine–house, jewelry, car, etc.  But presumably so will her debt… Obviously I can´t pick and choose what looks best on the Net Worth report, so what do you recommend?  How do you do it, and why?

Edit: I’m inspired by all y’all tracking your net worth, and I want to be smart like you. I’m looking at you Alicia, Natalie, Bridget, Jordann, Michelle, Robin, Ciel Belle, and anyone else who cares to comment. I like Mel’s spreadsheet, too. Thanks everybody.

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27 thoughts on “January Update: The Problem With Tracking Net Worth

  1. Yikes, Chela, I don’t have a clue. I’ve seen this tracking thing in a few sites. I was wondering, how do you put a value on your home? Just because I bought it for a certain amount doesn’t necessarily mean I can get more than that amount 3 years later, if even the amount we paid for it! My minivan will be used until it is junkyard-worthy, like we always do. And savings, etc., are ever-changing. I will be back a LOT to see if anyone gives you concrete advice on this subject. Good questions, Chela! Thanks for thinking to ask them. 🙂

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    • Exactly! I foolishly hadn’t considered how difficult this task would be! We definitely plan on driving our cars til they won’t go no mo’, but… that doesn’t make them worthless to us. I guess I need to give more thought to WHY knowing net worth is important.

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  2. I only count the kelley blue book value of my car. I’m also very picky about adding up with other kinds of assets I have coming from my household (jewelry, computers, etc). I almost never really count them because if the shit hit the fan, it’s not as liquid as it could be. I know, its a depressing thought! 😦

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    • You’re right that liquidity varies from asset to asset, but then what about if I owned a house? Like Kay said, which value do you use there? Property is definitely not very liquid and yet people always include home values in their estimations, right? Thanks for telling me how you do it, Tonya.

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  3. Thanks for the link back!

    I only count appreciating assets in my net worth — so things that increase in value as time goes by, not decrease.
    But that’s because almost all my assets are cash. My fiance & I share a car but it’s such a piece of crap I doubt we could really get anything for it.

    I wouldn’t recommend counting things like jewelery or video games in your net worth calculations. Do you really think you could get $10,000 if you sold all your videogames today? I sometimes I think I could sell my designer bags for cash, but I bet I’d get less than 1/3 what I paid so I don’t count them in my net worth either.

    Not all assets are stuff, and not all stuff is assets

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    • Hmm. That’s a good point. I was thinking of assets as “stuff that I paid for” which is why using “what I paid for it” was the natural progression. It’s a good idea to only count assets that appreciate. In that case, I’d probably count jewelry and the piano? (I’ve inherited some really lovely stuff), but maybe not the gaming. We counted that because we have it insured that way. My husband has a massive collection. Thanks so much for reading and taking the time to comment. 🙂

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  4. The Net Worth I share on my site is only for my “liquid” assets. Anything that is pretty illiquid, I ignore. So I don’t even include my car or my house (that isn’t necessarily accurate because I own a home, with a mortgage but for the sake of what my net worth calculation is on my site – aka, to watch my debt go away – I ignore it). That will likely change in the future, but for the time being I ignore them.

    Also, I would really not include items, period. For example, I have two rings – one is appraised for $4500 (my engagement ring – which is about double that it cost, so obviously inflated), and the other was my Mom’s and she gave it to me. It’s appraised at about $9,000. She tried to sell it to a jeweler and they wouldn’t even give her $700. For that reason alone, nice lovely stuff or not, I’d stick to tallying your accounts and your debt.

    PS, thanks for the link-back. 🙂

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    • Thanks for the comment, Alicia. I’m surprised you don’t include your house or car at all. But if the main goal is to watch debt go away–which mine is, it makes sense to tally debt against savings. I appreciate you taking the time to read and respond.

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      • I have another spreadsheet that includes my house and mortgage. I just don’t share it. Honestly, it was just never the point of my blog to kill the mortgage. And my car might be worth $5k if I sold it. But I need a car, so I don’t see myself liquidating either a house of a mortgage.

        Any growth on the house is unrealized gains until you sell it, so it seems silly to say “hey my net worth went up by 20k because my house went up by 10%”… until someone pays it, it isn’t worth that 🙂 Also, loads of people are looking into Financial Independence, and a paid-off house helps, but if they’re looking at the 4% rule – they need to be liquid investments. So the house gets thrown out in those calcs as well 🙂

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      • You’re right! I’m starting to think I’m going to adopt a “savings vs debt” model instead of aiming for “net worth” per se. Thanks again.

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  5. Tracking net worth is hard because of the different types of items that people own. For me, I only like to include the value of items that appreciate. Yes, if I included everything in my house (furniture, appliances, etc.), that would inflate my net worth, but it doesn’t really mean anything since it all depreciates and will eventually be worth nothing.

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    • Sad to think about everything eventually being worth nothing, but you’re right. It seems smart to only include items that appreciate. Thanks for the comment!

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  6. J. Money has a really good spreadsheet to use. You can find it here: http://www.budgetsaresexy.com/net-worth/

    He includes his house, but at its current market value. He gets its current market value by asking a realtor friend every once in a while.

    One method I like for calculating house worth is the one detailed by the PoPs. Here’s the original post: http://www.plantingourpennies.com/determining-a-homes-value-part-1/ and their update on Zillow: http://www.plantingourpennies.com/updated-thoughts-zillow/

    For our net worth (not shared on blog), we put our house, KBB value for the cars (private sale, good condition, correct mileage and zip code), and the current value of our retirement accounts/savings/debts. I exclude all house possessions and jewelry. It’s not the replacement value that counts, it is how much you could get if you were to sell it.

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      • I looked at J. Money and he only specifies “Assets (savings, investments, property, etc)”, but you’re right, resale value seems to matter more for financial planning than replacement values. Thanks for responding!

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  7. However you start tracking your net worth is up to you – and as long as you do it the same every time, you’re getting an accurate idea of how it’s growing… or not.

    I do think you might want to think resell value though on any of your items. I only count a few in my own net worth – things I think I could sell quickly and a realistic amount I could sell them for – because that’s what they’re actually worth now, not whatever I paid for them.

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    • I’m definitely seeing that resale value is the way to go.
      So I have to ask, in your spreadsheet I notice you include insurance payout value, too? It makes sense because it’s something that I “own” but, yikes, it feels like cheating because that instantly makes me a millionaire!

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      • No, there’s usually a cash out value on your life insurance – so it’s not the amount you would get in case of death. It’s the amount you can cash in your life insurance for today. I don’t know if it applies to all policies. For instance, my parents bought a $50,000 life insurance policy for me as a child that they paid into for like 10 or 15 years. I have no idea why. I opted to cash it in a few years ago to pay for my student loans. It came out to a little under $10,000.

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  8. Chela, I have never sat down and figured out what my net worth. As far as I’m concerned until my debt is gone it feels like zero. I do commend you and your followers who have seem to master this art. Maybe one day I’ll grow up and join the grown ups.

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    • Haha Petrish I don’t know if I’m ready to join the grown-ups! I decided to start tracking net worth because it seemed like a smarter way to assess my finances than only considering debt, but the more I think about it, the more I think I just want to weigh and track debt and savings.

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  9. I only include: my real estate and investments. I don’t own a car and I don’t have expensive jewelry etc. I don’t think I included my life insurance when I looked at my net worth last year either. Use MINT or some other online finance tool-it makes things easier to manage.

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  10. I don’t count my possessions, because realistically they aren’t liquid; I can’t sell car or computer or jewelry either for practical or sentimental reasons. So I just calculate money, both debts and assets (cash, retirement accounts).

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  11. Pingback: Resolution Check In: January Update | SmashOdyssey

  12. Pingback: Upping My Progress Tracking Game | SmashOdyssey

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