Author Topic: Net worth and investment  (Read 1829 times)

adventuretoretirement

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Net worth and investment
« on: March 29, 2014, 07:13:37 AM »
I am investing in a company.  I have no idea if or how much money it will make.  I am basically throwing some money at it, but hoping it makes money in a couple of years.  My question is, should I take the amount of money I am investing off of my net worth, or show it somehow?  If I show it, should I show it at half it's value? or what?

Cpa Cat

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Re: Net worth and investment
« Reply #1 on: March 29, 2014, 08:24:16 AM »
If you're reporting your net worth to somebody (like a bank), then you would report it at whatever value it reasonably has in the current year. Unless you have some notice that it's a failing business, that would normally be what you invested in it (or, if you've received purchase offers - you can use that to value it).

For your own calculations/financial planning - that's up to you. My experience with personally having this kind of investment is that even if you expect it to make money, you cannot know when or how much. In the calculations I do with my own financial planning, I value speculative investments as 0, unless they are currently producing income.

This is a conservative approach - you basically value it as a total loss until it's not a total loss. But I've had business partners who planned around companies being worth X, only to experience distress when it was a loss.

soccerluvof4

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Re: Net worth and investment
« Reply #2 on: March 29, 2014, 08:54:15 AM »
Its an investment and hence should be shown as that. If it makes money it goes up. If it disappears then down. But for now just the dollar amount as an investment. Once the business gets going you will be figure out ^ or v  value. But i would have in separate category such as business investment.

arebelspy

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Re: Net worth and investment
« Reply #3 on: March 29, 2014, 09:04:00 AM »
I have something similar I count at $0, as that's what I expect to make on it, it's just a black hole I throw money into.  My net worth goes down each time I have to make an "investment."

I have something else that I count at the amount I invested - I expect to break even.

I have something else that I count as 12% above what I invested.

Do your best to figure out what you expect to get out of it.  It may be nothing, which is painful, but then anything you do get in the end will bump up your net worth and you can take that as a bonus.
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