Wednesday, July 20, 2011

Net Worth Accounting

I'm not completely accurate in my monthly net worth postings. The reason being there are certain account movements I don't bother to track due to the amount of work and there being no real need.

So I do not account for credit card balances because they are paid off with no penalties. I don't account for our checking accounts because monies sitting there is monthly/planned spending. Nor do I account for cash we keep in various currency for travel purposes. I don't even update at the same time each month.

The only things I track for net worth purposes are items that don't get much movement, large items that form most of our assets and liabilities. So that I can get a broad strokes idea of where we are.

I do not get involved with perennial arguments of whether primary residences and cars and personal property ought to be on a net worth statement. I have them on mine.

The one item we don't have any numbers for yet which will become significant with time is D's new pension. I'm assuming we are supposed to get some kind of statement regarding the value of it.

D has looked into it and he was told there is an annual statement that gets published. So we'll just have to look out for it this year sometime. Once we get our hands on it, I'll be able to do a once a year update.

I probably ought keep on top of things in the real estate valuation area. We are likely still undervalued for our main house and cottage. But our ski condo worth is likely higher than it ought to be as markets have fallen in the area. Factoring everything, I'm still expecting us to come out ahead overall.

Whereas in the automobile department, it tends to only goes down. That pricks a bit. I can only imagine how it would feel had we bought new instead of 50% off.


  1. Calculating your "net worth" with things like houses and cars, I have to wonder what your end goal is. If it's to retire early as your blog states, I don't think those values are relevant.

    2 months ago, I had a 400K house with 200K equity, but the house was doing nothing for me as an investment. It got me no closer to retirement. However, I downsized to a 200K house and invested the remaining 200K into dividends stocks at ~4% and now I'm getting $8K/year income.

    My point is that money in cars, houses, or other household goods may add to total assets, but it's not an investible asset that gets you near retirement. So what's your goal?

  2. @TJT

    I don't expect my NWIQ numbers to do much other than track things for me and for comparison purposes.

    I'm going out on a limb here to say most financial bloggers I know don't believe that primary property values are that useful as you cannot eat your house.

    It's only useful when you liquidate and tracking it allows you to decide when it may be a good time to liquidate.

    Having said that, when I look at other peoples' numbers, I take into consideration how much primary housing is responsible for total assets as housing markets differ which tends to be reflected in how much mortgage debt is incurred and what that may mean in terms of work stress.