Networth – What is included

by Dual Income No Kids on March 22, 2007 · 0 comments

This post is actually in response to a comment that was left on our post “The DINKs Wealth, What’s Working & What’s Not”. I felt that it brought up some good decision points in terms of what is included in net worth.

The basic question was why we include furniture as part of our net worth.

The argument against including furniture in net worth was that even if we sold our furniture we would presumably have to purchase more furniture. I’d like to point out that if you sell your house, presumably you would buy another house. This is the same for cars and most other household items like this. Thus, I would argue that furniture is no different in terms of a depreciating item that might be included in net worth.

It is also true that there is a great deal of flexibility in what net worth items might be replaced or not replaced. For instance, when I moved from Oregon I sold both my car and all of my belongings. I did make a profit on these and I didn’t buy a new car or furniture when arriving in DC. I also have a bicycle listed in my net worth, but if I sold it I likely wouldn’t buy another one.

People often make lifestyle changes that result in a net worth item fluctuating in home it might affect your bottom line. For instance, a couple might choose to move to a smaller or less expensive place and get a larger chunk of change for selling their home than a couple who choose to move to a larger and more expensive place. The same goes for making the choice to live without a car.

Another interesting thing to consider are the items that are included in net worth, but actually do damage to your bottom line. For instance, a car is counted as an asset, but you likely pay more to maintain it and finance the credit than the car is actually worth. The same goes for a TV. You might include this in your net worth, but by having a TV you are likely paying a cable bill that actually makes having the TV a liability. We have neither a car nor a TV, thus these aren’t included in our net worth, but this actually impacts our net worth in a positive way over the long run since we aren’t flushing money into these items.

Food for thought in sorting out your net worth.

Enjoy your day!

Miel

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