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After 6 years of living on the red side of the ledger, I finally have a positive net worth as of today! I still owe about 1000 bucks to a relative of mine from whom I had loaned $7500 to pay off my credit cards. I can pay him off now if I want, but as long as I am keeping to my promise of paying him off by Dec, I am doing good.

I can live up to my name now. Next stop; buy a car. I have been without a car for more than a year.
BNM
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Congratulations! I remember when I "crossed the divide" not all that long ago, and to encourage you further, I am now close to +$100K!

:-D
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Joe...

You married? ;o)

FitGirl
...still in the negative but trying
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Mmmmm $100K! That will be one really happy dance!

I owe it all to the Fool. Before I started lurking around these boards, I was paying off my debts, but in a casual, 100 bucks here and there way. After I used up my free month's subscription I bought Quicken (Not the newest version. 2002 version for $5. I was learning fast!) and started writing down expenses. After the first month I sat back astonished. I was spending $300 a month eating out! That was not including $150 on groceries. From then on it was lunch from home for me.

I have discovered the sweet pain of removing a large fraction of my salary away from sight as soon as possible. I am enjoying the process of waiting until I have paid off my cousin before going off to buy a car, even though I have a FICO good enough for a car loan. Until then I am reading up on everything I can find on the Net about inspecting and buying used cars.

It is a whole new life for me.
BNM
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Bad news: Yes, I am married.

Good news: I have always wanted to live in Utah.

;-) ;-) ;-) ;-) ;-)
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Congratulations! That's so awesome! And encouraging!

Frydaze1
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Congratulations on moving into the positive! Once you can start to get your money working for you, I hear it gets easier.

Depending who loaned you the personal loan, you may want to consider repaying them earlier. (It's always possible that they aren't in the same financial situation that they were in when the money was loaned ... and it always looks good to pay off personal loans early when you can.)

DizChick
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Joe...

You married? ;o)

FitGirl
...still in the negative but trying



FitGirl, aren't you married?

DizChick
yes, I'm sure you were kidding, I just couldn't resist :-)
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Yeah, okay DIZ, you caught me! I couldn't resist either. ;o)

FitGirl
...but still thinking about Utah and LMAO at Joe!
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This board was a whole new life for me too! I'm not where you are yet but I will be in 16 months. I can't wait! But I will. This board has taught me many things and being a teacher I will share this experience. The most important thing it has taught me,I believe,is patience which is why I will wait for that 16 months to fly by.
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I'm never sure what the best way to calculate net worth is, so I end up doing it two ways on my spreadsheet. The first is with all debt (which is primarily my mortgage) and I am well in the hole thanks to all the money I owe on the house. The second (to make me feel better) is not including the house or the small amount of equity I have, and I think I'm about +$20K in that.
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I'm never sure what the best way to calculate net worth is, so I end up doing it two ways on my spreadsheet.

Congratulations to you for looking at personal finances from multiple perspectives. That kind of exercise is always useful.

Net worth = assets - liabilities. To look at net worth you'll need to include what you owe on the house and it's market value. If you have equity in the house, including it's value and mortgage will result in an increased net worth.

Good luck,

Bruce
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The most important thing it has taught me,I believe,is patience which is why I will wait for that 16 months to fly by.

I can hardly wait for paycheck day every month so that I can immediately transfer some to ING and write a check to my cousin for the month's installment.

After I've paid off my cousin, that $1500 goes straight to savings. Just thinking about it makes me all tingly.
BNM
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<<Net worth = assets - liabilities. To look at net worth you'll need to include what you owe on the house and it's market value. If you have equity in the house, including it's value and mortgage will result in an increased net worth.

Good luck,

Bruce
>>


While you can include anything you like in a net worth statement, the usual method used by accountents list the value of assets at their purchase price, not market value.

Market value is often a guess, while the purchase price is ordinarily known. And market value can be wildly volatile, while purchase price is stable.

Personally, I value stocks and bonds at the market price that appears on brokerage reports and such, while I list real estate at its purchase price.


Seattle Pioneer
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While you can include anything you like in a net worth statement, the usual method used by accountents list the value of assets at their purchase price, not market value.

Yeah, but that would still create a positive effect for someone who has any equity in their home. The impression I got from an earlier post in the thread was that someone was including their mortgage to give themselves a huge minus, without including the positive value of the home as an asset. Of course, this would not be the case for someone that has tapped over 100% equity.

There a lot of ways to do it, but I would just use the appraisal value that was given the last time debt was issued with the house as collateral. That way the debt vs. asset equation would be comparing apples to apples. Of course, this could be clouded by significent ups or down in the housing market. Seems like it's just a matter of what gives you the most insight into your household balancesheet.

Later,
Marc
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I've also seen people list net worth without their mortgage/equity. I have friends that on paper have a net worth of 200K (due to the insane jump in housing $$ in NYC area) all of which is due to real estate, none of it is cash/bonds/stocks.

You'd think that someone with a networth of 200K would be well off, but most of these friends don't have an extra dime to spend or save at the end of the month and scrape to get by.

So the term "Net Worth" can be deceiving.

Applehead
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Applehead, I think this is why many people on the REHP board don't use mortgage equity in net worth. It often skews the results because people in very high appreciation areas seem to have a high net worth, but it would be difficult for them to actually realize it unless they sold the house and moved to a much lower cost area or an apartment.
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You'd think that someone with a networth of 200K would be well off, but most of these friends don't have an extra dime to spend or save at the end of the month and scrape to get by.

To me "net worth" is how much money I would have if I cashed out all my assets. Yes, you might have a high net worth but live paycheck to paycheck. This couple should take some comfort in the fact that if they had to sell, then they would have some money to show for it.


While you can include anything you like in a net worth statement, the usual method used by accountents list the value of assets at their purchase price, not market value.

Market value is often a guess, while the purchase price is ordinarily known. And market value can be wildly volatile, while purchase price is stable


To Seattle,

We've been in our house since 1975....we live in the SF Bay Area of California...get the picture....our house has appreciated in the neighborhood of 1,000%! YIKES!!!! There is no way I'm going to use the purchase price as my net value when I'm thinking about retiring and moving out of the area. For DH and myself, our total net worth is an important figure in deciding exactly when we can afford to retire.


Utahtea
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Congratulations! I remember when I "crossed the divide" not all that long ago, and to encourage you further, I am now close to +$100K!

:-D


Wow Joe! How long ago was it that you crossed over into positive territory???

d
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There is no way I'm going to use the purchase price as my net value when I'm thinking about retiring and moving out of the area. For DH and myself, our total net worth is an important figure in deciding exactly when we can afford to retire.

I use about 10% less than the current value. I figure that would probably be about how much it would cost us to sell it. We are also not wedded to living in the house forever and there are lots of less expensive options that are fine for us, either here or somewhere else.

rad
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While you can include anything you like in a net worth statement, the usual method used by accountents list the value of assets at their purchase price, not market value.

Personal accountants? Corporate accounting treatments differ depending on the asset. Assets are recorded at cost and the difference between purchase price and sale price (once an asset is sold) is accounted for separately. Stocks are accounted for at par value (if it's relavent), not market value. All of it is well and good and makes a lot of sense for corporations, but not for individuals.

I think for individuals, the best course would be most recent assessment value for real estate, and average market value over an annual period for stocks. Since net worth is intellectual anyway, it seems like the least biased method. I personally don't count any of the "stuff" that some internet sites say one should count (furniture, jewelry, car, etc.). But that's me.
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"You'd think that someone with a networth of 200K would be well off, but most of these friends don't have an extra dime to spend or save at the end of the month and scrape to get by. "

Thats why businesses use income statements, balance sheets and cash flow statements to give a true picture of the business. Individuals need to do the same thing to get a complete picture of their finances.

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The impression I got from an earlier post in the thread was that someone was including their mortgage to give themselves a huge minus, without including the positive value of the home as an asset

This was actually my problem. What I was doing was having the mortgage as a negative, and my equity as a positive. I guess what I should have done was have the mortgage as a negative, and the home's value as a positive. I didn't want to be overly optimistic, so I just use what I paid for the house minus 6% for realtor fees. I'd increase it if I get a new tax assessment or whatever.
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Wow Joe! How long ago was it that you crossed over into positive territory???


About three years ago. :-)
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Welcome to the black ink club!

-- Laura
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