ADVICE: PERSONAL FINANCE

Risethestudio posted a link to this article. One thing that amazes me about some of the personal finance bloggers is the breadth of articles they find. Since I’ve started reading the blogs, I’ve been subscribing to new RSS feeds right and left.

This article in particular sheds light on a topic that should be near and dear to many bloggers hearts. There are numerous blogs online where people track their net worth, but I’ve always been dismayed to see how many add depreciating assets, like cars, to that value. Perhaps this is technically correct, but more important than the ‘current net worth’ number is the amount of net worth that will be usable in the future.

And if anyone really believes that his late-model Acura will do anything for him in retirement, he’s sorely mistaken. Adding cars in to net value calculations has the benefit of hiding the debt incurred to purchase those cars, and not much else. The same is true of most other consumer items.

I’m not sure I agree with the article’s contention that it is harmful to include one’s house in net worth. True, you need to sell your house to capitalize on that value, and possibly move somewhere cheaper. But as an example, this morning I talked to a woman in a blue-collar job who just sold her house for $850,000 and is moving to Southern Oregon. Household assets can become financial assets. If you’re willing to make that sacrifice (I’d love to move to Southern Oregon), I think it makes sense to include your home’s value in net worth.

Sounds good to me, and it looks like my wife and I are on the right track. Huzzah!

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