Can you know what you’re worth?
July 16, 2007Thanks for visiting! If you like what you're reading, you may want to subscribe to my RSS feed.
Discusssions about net worth are ubiquitous and frequent in the personal finance community, but that shouldn’t stop me from adding my own two cents to the debate.
Opinions about what to include when calculating net worth figures are diverse but generally either in favour of including personal belongings such as property, cars and art or not. While I oppose the idea of including every single piece of furniture in your apartment, I think more valuable items that are likely to uphold their value over time should be included.
Going slightly further than that, one could use accountancy standards of depreciation to include items that can be expected to lose value over time, yet nevertheless constitute a substantial financial outlay when purchased. Cars are a popular example and I’m pretty sure most people are aware of the rapid depreciation in value they bring. As with everything in life the depreciation methods one can use are pretty much endless, and hence a lot of research is usually needed to make sure the calculated amount reflects the actual value of the item as correctly as possible. If in doubt, always use the lower figure to avoid relying on money you don’t have.
If you’re not exactly sure what belongs onto your personal balance sheet*, I recommend you read this article at Fool.co.uk which should give you a pretty good introduction and a long list of things that might be considered as increasing your net worth. Bear in mind that you may have to think about de- or appreciation of some of these items and make sure you find the best possible way to do it if you really want to include depreciating items into your calculation. Speaking of calculation, head over to this site for an easy-to-use net worth calculator - just in case your arithmetic isn’t the best anymore (or the numbers are simply too large… 
).
* A balance sheet is a financial statement used by companies to compare their assets and liabilities. The difference between these two figures determines the net worth.
I often wonder what different people include in this sort
Ad | July 16, 2007 | 6:04 pmI often wonder what different people include in this sort of calculation. There is even some margin for including the payouts from one’s life insurance as if you die this is what your estate is worth to those you leave behind. But whilst still alive you have no access to this money so it is a bit of an odd one.
For reference, when drawing up my will the solicitor did want to include my car, (bike) and any valuable furnishings/art etc. , property, shares, life insurance blah blah, in the calculation, but I guess I would be dead by that point so it makes life simple.
Well, it makes sense to include your car and art
Kirsten | July 17, 2007 | 3:21 amWell, it makes sense to include your car and art etc. in your will to make sure the right people get the right stuff (broadly speaking). Yet this doesn’t necessary mean it’s an accurate reflection of what you’re worth, does it?
This was to calculate the value of the estate to
Ad | July 17, 2007 | 9:14 amThis was to calculate the value of the estate to assess tax issues, not to leave items to specific people… I don’t tend to like including my car in such values anyway as it depreciates far too quickly