During one of my Net Worth updates a few months back, one of you made a comment along the lines of “I don’t like to calculate my NW. I am more valuable than a number.”
I get that. No one is saying that your net worth defines the very essence of your character. But that doesn’t mean your net worth isn’t important.
I post my net worth updates each month as a way to track my progress over the years. What I don’t want people doing, including you, is comparing your net worth to mine. You have a different income, different living situation, and different priorities than me. Who cares if my net worth went up more than yours, or if yours went up more than mine? As long as we are doing the best we can with the cards we’ve been dealt, nothing else matters.
Heck, we may not even have the same definition of Net Worth. You can see from my monthly updates I include the following items in our calculation:
- Checking Accounts
- Savings Accounts
- Roth IRA
- Credit Card balance
That’s it. It usually only takes me a few minutes to crunch the numbers and see where we stand. This, however, might not be the most accurate reflection of our true net worth. For example, I have $5,000 sitting in a blogging account that I’ve ignored all year. Why? Because I know Girl Ninja and I are facing a huge tax bill this year and I will be giving all that money to Uncle Sam here in the next few months.
Or how about our cars. My car is worth around $11,000 and the wifey’s should sell for around $8,000. We owe nothing on them, so including these figures in our totals would give our NW a healthy bump by nearly $20,000.
Girl Ninja also has a retirement account set up through the San Diego School District that we have totally ignored (I’m really lazy and haven’t filled out the necessary paperwork to have it rolled to a private IRA). I think there’s about $3,000 in that account that I could include in our net worth, but until I’ve actually done my due diligence and rolled that sucker over, it’s like it doesn’t exist.
Lastly, if we wanted to be super intense, we could itemize all of our possessions and guesstimate their value. Laptop $300, TV $600, Couch $1,000, etc. That sounds way to tedious and miserable for me to ever sit down and actually figure out, so I’ll just take a shot-in-the-dark and assume we have about $5,000 in miscellaneous possessions.
Moral of the story:
My NW updates are a quick way to see if GN and I are making good (or bad) progress towards our financial goals. Nothing more, nothing less. It’s definitely not the most accurate systems, but it works great for us.
Do you calculate your net worth semi-regularly? If so, what accounts/items do you include in your calculation? Is there anything you leave out of your NW, but you could include if you wanted?
p.s. I’ve posted this comic before, but it’s just too good to not repost today…