Calculating your Investment Net Worth

I found a site that I really like; it’s called Net Worth IQ and it’s a social network around calculating (& sharing if you feel so inclined) your net Worth.

 To be conservative in calculating your Net Worth, you should LEAVE OUT:

a) Any ‘equity’ in your house that you NEVER intend to release as investment (i.e. borrow against for purchasing, when the timing is right, income-producing-buy-and-hold-investment-real-estate).

b) Any supposed ‘equity’ that you have in your business.

Let’s call the result your INVESTMENT NET WORTH …

 It’s the only one that matters!

Why?

Well,there are only TWO reasons to even bother calculating your Net Worth:

1. To ensure that your ‘portfolio’ matches the Rules of the Rich (e.g. the 20% ‘rule’ on home equity that I talk about in a recent post), and

2. To check whether your INVESTMENT NET WORTH (which should be in passive income-producing investments by then) can FUND your ideal retirement with at least 99% chance that your money won’t run out before you do.

I must confess that for the purposes of the Net Worth IQ site … I broke those two rules, so I should lower my Net Worth by approx. $2.5M, and I may make that change later – I haven’t decided yet.

BUT, I have already done the calcs and am acutely aware that my INVESTMENT NET WORTH can EASILY fund my retirement starting next year (I’ll be 50 … now, that’s old, Man!).

If this makes sense to you … check out some Tips that I have already left on that site and this blog.

Now, what’s YOUR Investment Net Worth … more importantly, can it fund your IDEAL retirement?

11 Responses to “ Calculating your Investment Net Worth ”

1. SavingDiva says:

   March 12, 2008 at 12:15 pm

   If you look around Networth IQ, you’ll noticed that people consider their cars as part of their networth and personal posessions. I laugh when I see $20,000 in personal posessions (probably just furniture).
2. AJC says:

   March 12, 2008 at 12:52 pm

   I love Networth IQ too, Diva. But, I agree … shifting it to ‘investment net worth’ would be an improvement.
3. Devolving the Myth of Income … Part I « How to Make 7 Million in 7 Years™ says:

   March 19, 2008 at 7:44 am

   [...] If so, strap in, because I am about to devolve the myth of income by looking at two case studies, both from Networth IQ a web-site for people to track (and discuss) their own Net Worth. [...]
4. Devolving the Myth of Income … Part II « How to Make 7 Million in 7 Years™ says:

   March 30, 2008 at 7:15 am

   [...] Today, I want to finish exploring this subject by looking at question recently posed on Networth IQ a web-site for people to track (and discuss) their own Net Worth. [...]
5. Applying the 20% Rule - Part I ( Your House) « How to Make 7 Million in 7 Years™ says:

   April 11, 2008 at 6:38 am

   [...] for those who have been tracking my posts, the difference between your Notional Net Worth and your Investment Net Worth will be the Current Market Value of Your House + the Current Market Value of Your Possessions; if [...]
6. Stolid says:

   May 7, 2008 at 10:59 pm

   One thing I’m hoping/planning to do is buy a beat up but sound home, fix it up and clean it up, live in it and pay off the mortgage then buy a new one and move into it and turn the other into an owned free-and-clear investment rental.
   I suspect you’d encourage me to leverage the house [refinance it to an investment loan] but I already hate the fees I’m paying for the first mortgage, nevermind refinancing! Thoughts?
7. AJC says:

   May 7, 2008 at 11:24 pm

   @ Stolid – wouldn’t dream of telling you what to do but will ask a couple of questions: (a) how long will it take to pay off House # 1 b4 u buy house # 2? (b) have you run some numbers on both scenarios (i.e. pay off #1 b4 buying # 2 vs. leveraging # 1 to buy #2)?
8. Spending your Net Worth « How to Make 7 Million in 7 Years™ says:

   February 27, 2009 at 2:36 am

   [...] about it, if 75% of our Net Worth is in investments (this is called your Investment Net Worth … it does NOT include your house, cars, and other cr*p that you may have lying around) and [...]
9. real rich, real simple « How to Make 7 Million in 7 Years™ says:

   April 30, 2009 at 2:51 am

   [...] … and, wait until you have reached your Number (through sale of business and/or conservative valuation of your equity in your investment assets). [...]
10. Beat 80% of professional fund managers!- 7million7years says:

    September 17, 2010 at 6:46 am

    [...] Plug your starting Investment Net Worth (i.e. what you could scrape together to invest) into a compound growth rate [...]
11. real rich, real simple, redux- 7million7years says:

    June 23, 2011 at 9:00 pm

    [...] … and, wait until you have reached your Number (through sale of business and/or conservative valuation of your equity in your investment assets). [...]