dcsimg The Get Rich Slowly Forums • View topic - Best way to calculate Net Worth?

  GRS Home  Forum Home
Bank Rates Center
   Savings Account Rates
   Money Market Rates
   Highest CD Rates
Insurance Rates Center
  Auto           Health
   Life              Home
Mortgage Rates Center
  Mortgage Rates
  Mortgage Quotes

Last visit was:
A place for Get Rich Slowly readers to ask questions
and exchange ideas
It is currently Fri Oct 24, 2014 3:25 am




Post new topic Reply to topic  [ 31 posts ]  Go to page Previous  1, 2, 3
Author Message
 Post subject:
PostPosted: Sun Apr 15, 2007 2:39 pm 
User avatar

Joined: Sun Apr 15, 2007 1:45 pm
Posts: 84
Location: New Jersey
I use Microsoft Money to track my finances, so it's easy to calculate net worth as long as I do all the accounting properly. It's all too easy to create fictions to hide things from yourself.

I don't own a house, so I'm free from that dilemma, but if you do, I think it's important to track both "net worth" and "net worth minus primary residence". Your house is an asset, after all, and the equity can be available to you to borrow against.

I charge depreciation on my car every month as an expense. (Your car payment is NOT an expense -- only the interest portion of it is. A huge mistake I see a lot of people make is treating the payment as a monthly expense.) Sometimes some hand-waving is involved in estimating depreciation, but that's okay -- a lot of things in accounting are half hand-waving. As long as the result is honest and useful, you're okay; the number doesn't have to be precise every month, but it has to be accurate over the long term, and to be useful, it should allocate expenses where they are incurred. If you drive 5,000 miles one month, you charge more depreciation to that month. It's also okay, for example, to distribute the initial off-the-lot depreciation of a new car over, say, the first year you own it, on the assumption that you know you won't be selling it for at least that long.

Tracking the loan balance (and splitting the payments for accounting purposes into interest and principle) gives you a bottom line on that, along with a true indication of your monthly expense -- depreciation plus interest.

Once you have everything set up and you're doing proper accounting of everything (not hiding things from yourself, like pretending that your monthly credit card payments are an expense rather than the actual purchases made) it all falls into place.


Top
Offline Profile   
Display posts from previous:  Sort by  
Post new topic Reply to topic  [ 31 posts ]  Moderators: bpgui, JerichoHill Go to page Previous  1, 2, 3


Who is online

Users browsing this forum: No registered users and 15 guests


You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum
You cannot post attachments in this forum

Search for:
Jump to:  
Powered by phpBB © 2000, 2002, 2005, 2007 phpBB Group
Theme created StylerBB.net & kodeki