Comments on: Baggage Inspection

By: Adrian

Adrian — Fri, 19 Dec 2008 04:47:49 +0000

Diane – It’s enough to say “if he applies his income (in any way other than spending it), his net worth goes up by that amount”. When you save money, your Net Worth automatically goes up by the amount that you have saved. This is an important concept that you raised, so I will be posting your question, soon. Thanks!

Now, Lee’s home equity may have gone down (due to market conditions) and also gone up (due to repayment of mortgage) … net result, no change. But, I’m just guessing … Lee?

By: Diane

Diane — Fri, 19 Dec 2008 00:54:12 +0000

So, if he applies $ from his income to his mortgage and thereby improves the equity he has there, his networth goes up by that amount unless he downgrades the value of his home on resale (which is only now coming into play). If his home value stayed/stays constant, his networth improves. What I don’t see in Lee’s NetworthIQ “pictures” is a change to the equity in his house.

By: Adrian

Adrian — Thu, 18 Dec 2008 03:36:05 +0000

@ Diane – It’s what you ’save’ from your income (i.e. after expenses) that goes into improving your Net Worth regardless of whether you use it to build up your bank balace, pay down debt, or – as Scott suggests – buy a new asset.

By: Diane

Diane — Thu, 18 Dec 2008 02:32:41 +0000

How do you calculate your earning potential in your networth? It feeds the total bottom line (source of water) – only spending it will keep it even (think balanced budget) or overspending it (as I am doing with no incoming income, but savings only now) then networth goes down. ?

By: Diane

Diane — Thu, 18 Dec 2008 02:29:22 +0000

Adrian, I assume he is applying income to his net worth and that is NOT reflected in the assets/debt columns of the networth calculations – it’s future cash for the most part (those who have incomes ) — or did I miss how else the income is reflected other than as a header above (along with our education)???

By: Scott

Scott — Wed, 17 Dec 2008 21:28:49 +0000

@ Adrian – I completely agree about the mortgage. As long as you are living in your home, it is a liability and costing you money if anything.

That is, unless you are prepared to tap into that home’s equity and use that money to invest.

By: Adrian

Adrian — Wed, 17 Dec 2008 18:42:16 +0000

@ Diane – Nice idea, but it doesn’t work that way Paying down your mortgage does NOT change your Net Worth … it just reduces both your CASH and MORTGAGE balance columns in your NWiQ profile … your total of Assets – Liabilities (hence, your Net Worth) remains the same. I’ll accept any opposing views, anybody? We’re all here (including me) to learn …

By: Diane

Diane — Wed, 17 Dec 2008 17:37:22 +0000

Lee, I also assume you are paying down your mortgage some – rather than just interest – is that so? If so, then your net worth may be going up

By: Diane

Diane — Wed, 17 Dec 2008 17:34:12 +0000

It was definitely a pleasure reading this post, Lee. I like that you have to bite your tongue at customs when they ask if you have anything to declare (I’m a great fan of Grace Burns, if not another Gracie. I love exploring and answering the other meanings of things people say and don’t realize they’re saying such.)

What are you next immediate plans?

By: Scott

Scott — Tue, 16 Dec 2008 12:54:27 +0000

Well Lee, it looks to me like you may be ready to venture straight into Money Making 201 from here. It will be a pleasure and inspiring to me to watch you succeed across this journey and I look forward to learning all I can from you.