KLE 3: What is your Investment Net Worth?

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There is a site that I want you to join and become very familiar with; it’s called NetworthIQ and it’s a social network centered around calculating (& sharing) your Net Worth.

Investopedia defines ‘net worth’ as:

Let’s say an individual has only three assets, $100,000 of common stock, $30,000 worth of bonds and title to a $190,000 house. Conversely they have only one liability, $150,000 owing on their mortgage. The individual’s net worth would be $170,000 ([$100,000 + $30,000 + $190,000] – [$150,000]).

Simply put:

Net Worth = What You Own – What You Owe

If you owned a house worth $180,000 and a car worth $20,000 but you still owe $150,000 on your house and $15,000 on your car (and, those two things are all you own or have borrowed against), then your net worth is $35,000:

($180,000 + $20,000) – ($150,000 + $15,000) = $35,000

Fortunately, you don’t even need to do this calculation for yourself, because NetworthIQ will do it for you!

However, this definition of Net Worth (which is the one that NetworthIQ also uses) is wrong – at least, for our purposes.

What you own doesn’t define how rich you are, it is investments that drive your wealth, so we will be making some mental adjustments which I will explain in a later Module.

For now, I just want you to understand the difference between your total Net Worth (as defined by Investopedia and NetworthIQ, above) and Investment Net Worth as defined below.

To calculate your Investment Net Worth, you should calculate your total Net Worth, but LEAVE OUT:

Note: You need to be a Premium Member to view this content:

Task 6: When complete, use your answers for Tasks 1 -5, above, to complete the following questionnaire:

Be Sociable, Share!
Name and State (eg John, FL)
Paste in the link to your NetworthIQ Public Profile
What is your current Net Worth ($)?
What is your Investment Net Worth ($)?
What is your Investment Net Worth (%)?

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Reader Comments

Why wouldn’t you split out retirement and non-retirement funds? The retirement accounts tend to be less flexible, especially if you are still working at the same company.

For most people of our net worth level, we (my wife and I) tend to have a lot more in retirement accounts, and less outside of them. That should change significantly this year at least.

@ Neil – If you mean in NWiQ, then there is a category for other assets; you could put your non-retirement assets in there.

I’m having a bit of trouble finding the responses I have made to other’s message. Can anyone help?

I’ve inputted my net worth details but unfortunately I cannot change the currency from US dollars to UK Sterling. I suppose I’ll have to convert the amounts to US dollars?

@ dnsolo – that’s what I do for my Australian, New Zealand, and UK assets … it’s the only way to compare apples-to-apples, or – in this case – greenbacks to greenbacks 🙂

Unfortunately, this means using prevailing exchange rates which means that your net worth can change quarter to quarter for no good reason. The alternative is to ignore the currency symbol and do everything in your local currency.

Either way works for the purposes of this Guided Learning Experience, as long as you are then consistent all the way through (i.e net worth / Number / annual living expenses / etc. /etc.