### Author Topic: Net Worth Calculation  (Read 1597 times)

#### frugalfoothills

• Bristles
• Posts: 274
• Age: 31
##### Net Worth Calculation
« on: March 28, 2018, 01:07:12 PM »
Couple of general questions as far as calculating net worth.

• Home value: one should be using the market value of their home as a positive asset, and then the amount owed on the mortgage as a liability, correct? I ask because I recently downloaded Personal Capital and it doesn't seem to take the value of my home into consideration at all... it is calculating my net worth only with the -\$137,000 (mortgaged amount.) My home is worth \$180K, so it's obviously tilting my net worth heavily into a more negative direction.
• Vehicle value as asset: I've seen it done both ways around here, where some use the value of their vehicle as a positive asset while others say not to include any depreciating assets in their calculation. I have a 2014 Acura MDX with a trade-in value of about \$22k based on KBB, and I plan on driving this car into the ground. Should I include in my calculation or no? What do you do?

#### neo von retorch

• Magnum Stache
• Posts: 3627
• Location: SE PA
##### Re: Net Worth Calculation
« Reply #1 on: March 28, 2018, 01:29:18 PM »
1. Yes.
2. No.

Net worth - come up with a consistent way to measure it over time. That's about the only value it has. Personal progress metric.

If you really wanted to include car, you could, but put the value in of a current private party sale... minus what you'd pay to replace it ;) And then keep it updated over time. (Pass!)

(You can't use net worth to calculate retirement - for that, you calculate invested assets minus outstanding debts, and see if it's 25x your ongoing expenses, not including the debt service.)

#### ClovisKid

• 5 O'Clock Shadow
• Posts: 38
##### Re: Net Worth Calculation
« Reply #2 on: March 28, 2018, 03:58:22 PM »
1. Yes.
2. No.

Net worth - come up with a consistent way to measure it over time. That's about the only value it has. Personal progress metric.

If you really wanted to include car, you could, but put the value in of a current private party sale... minus what you'd pay to replace it ;) And then keep it updated over time. (Pass!)

(You can't use net worth to calculate retirement - for that, you calculate invested assets minus outstanding debts, and see if it's 25x your ongoing expenses, not including the debt service.)

+1

#### SlowMustachian

• 5 O'Clock Shadow
• Posts: 43
##### Re: Net Worth Calculation
« Reply #3 on: March 28, 2018, 04:30:45 PM »
In PC you add the house as a manual asset and it will use Zillow’s value.
Agree with not including car, you have to keep decreasing your net worth for depreciation.

#### Michael in ABQ

• Handlebar Stache
• Posts: 1092
##### Re: Net Worth Calculation
« Reply #4 on: March 28, 2018, 04:42:25 PM »
I include our two vehicles in our net worth calculation. I update them from KBB private sale every 6 months or so. At this point our used minivan we paid \$15,000 for in 2011 is down to about \$5-6k. Watching that steady decline is a good reminder to not spend a lot on vehicles because eventually they all end up being worth just a few thousand dollars. My vehicle was purchased used for \$2,700 and the value is about the same 18 months and 15,000 miles later. At this point those vehicles are a not insignificant portion of our net worth but it's getting smaller all the time.

#### dhc

• Stubble
• Posts: 113
##### Re: Net Worth Calculation
« Reply #5 on: March 28, 2018, 04:57:43 PM »
Net worth is a pretty useless stat. I do my best to avoid focusing on it (Mint auto-calculates it, so I can't avoid it entirely, but I try).

If you won't be selling your house in retirement to downsize, who cares what it's worth? If you run your car into the ground as you should, what someone would theoretically buy it for today is similarly useless.

Much more useful: compare potential passive income (including 4% or whatever you're comfortable with as a withdrawal rate from retirement savings) with your current spending level. Your FIRE "number" should be based on those things, not an arbitrary number that also includes illiquid assets.

Now, for people who are planning to downsize (or upsize!), or to move from HCOL -> LCOL or vice versa, you also need to make adjustments for that. But again, net worth would be a pretty useless place to start.

#### frugalfoothills

• Bristles
• Posts: 274
• Age: 31
##### Re: Net Worth Calculation
« Reply #6 on: March 29, 2018, 08:29:59 AM »
In PC you add the house as a manual asset and it will use Zillow’s value.
Agree with not including car, you have to keep decreasing your net worth for depreciation.

This is what I needed to know! I only ever use the mobile app and didn't see a way to do it on there. On the web app you can add your home value. Thank you so much!

#### frugalfoothills

• Bristles
• Posts: 274
• Age: 31
##### Re: Net Worth Calculation
« Reply #7 on: March 29, 2018, 08:31:24 AM »
1. Yes.
2. No.

Net worth - come up with a consistent way to measure it over time. That's about the only value it has. Personal progress metric.

If you really wanted to include car, you could, but put the value in of a current private party sale... minus what you'd pay to replace it ;) And then keep it updated over time. (Pass!)

(You can't use net worth to calculate retirement - for that, you calculate invested assets minus outstanding debts, and see if it's 25x your ongoing expenses, not including the debt service.)

Makes total sense, I removed my car from my list of assets as I don't want to bother with it. It's got 50k miles and I plan on putting another 150k on it, so it really doesn't matter, I suppose :)