Cheers
David

I would love to start my own Net Worth Calculator, but in your previous article where you explain how to build one therr are no pictures. Can you tell me where I can get the pictures?

Will

Seems to me (I have no accounting experience) that you should count your entire value of your house is an asset, and your entire principle of your mortgage as a debt. Subract the later from the former, and you should wind up with a number close to your equity. Am I right about this?

Thanks for this guide. I’ve inputted my numbers into the spreadsheet and am quite pleased with what I’m seeing.

However, if I include the newly purchased home in the numbers things look grim. I’ve included the equity we have in the house (a few hundred dollars after only one payment) as an asset and the principal on the loan as a debt. This turns my net worth into a very large negative number. Should I or should I not include this?

I’d also like to echo what Kenny said above, thanks for the transparency!

Do you count the entire assessed value of your home in your calculations, or just the “equity part” that you’d be able to have in cash if you were forced to sell it amd get out? I missed the part where you may have written that you took out a mortgage or were able to pay cash for the house.

I am using my estimated equity only, because until my mortgage is paid off, I still have that debt to pay off.

THanks for your continued openness about money. It’s refreshing.

Imagine that the house was an investment like stock or that you where not the owner of our own house, but it was rather a fictitious company that owned the house. Now each month you pay that company rent, and that company in turn pays the mortgage and other house related expenses. The house like any other asset a company has, also has to be written off as time goes by. Any money left over is set to a home improvement fund (as part of my emergency fund), loaned back to you to invest or used to write down the mortgage.

As for me, my fictitious company is charging a quite high rent. To make things simple I am charging myself a fixed amount in addition to the mortgage payments. This is creating a constant drag on my net worth, but I think it will be a great investment once the house is sold.

This also removes the incentive to use your house as an ATM. The house is a fictitious company and you as a business owner have to act responsibly. Trying to extract as much money out of your tenant as possible (bleed them dry), and use that money to best effect. But you also have to be a kind business man, that wants to improve the tenants quality of life, sometimes at the expense of profit.

On the other hand, had you actually used historical cost instead of assessed value and dutifully recorded moving expenses you might have captured some truly valuable information. All of the small drops (moving expenses) and the big drop (the out-the-nose costs of buying a house) would have been recorded. That information might be valuable the next time that you move, at least if you record it in some form. Odds are, you might remember the difference between assessed value and what you paid for the house, but your memory will probably fail you when it comes to remembering how much work you ditched, what you paid for movers, and how much you paid for ready-made food during the move.

Of course, it’s pretty hypocritical for me to chastise you when I can bear recording those cliff-like drops either.

Yes, the rate at which your net income increases from now on will be quite interesting to watch taking shape.

His example was that, when he was renting, if he had to fix the fly-wire on a window it was spent money. Gone. Another example of the fruits of his labour slipping out of his hands forever.

BUT, when he bought his own house and had to fix a fly-wire suddenly it was ok. The fruits of his labour hadn’t slipped out of his hands – they were still there, in the form of a brand spanking new flywire that was ALL HIS (and my Mum’s obviously).

He hadn’t lost that money, it had merely changed forms.

Your net worth hasn’t dropped – or rather, owning your own home, with your own appliances, carpet, curtains and, yes, flywire is what your net worth is FOR. It’s these physical expressions of your net worth, the fact that the ownership is YOURS, that will carry you forward into the next phase of your life – mre so than the abstract number of dollars you have in the bank.