One of the perennial PF questions. I love Mint.com for showing you your net worth, but it is pretty flexible about letting you decide what is part of your net worth. When I first reached my current level of PF zeal about a year ago, I threw all “assets” onto Mint and was thrilled that my net worth was only -$4000. If you deal with positive numbers, “only” sounds like a bad thing. When you are ensconced in negative numbers, “only” seems pretty good.
Anyway, my car was (and still is) part of this assessment. However, people have pointed out to me that a car really shouldn’t be part of your net worth, because it is sort of illiquid in the sense that you couldn’t just go sell it and be without a car. Plus, where does it end? Do you count your laptop as part of your net worth? What about your Xbox, or jewelry? Right?
I have countered that thinking by pointing out that your car with a Kelley Blue Book value of $10,000 is most likely worth $10k to you if you wanted to buy another car. It would reduce the new car cost by $10k through trade-in or private sale, like cash. Plus, re: illiquidity you could say the same of a house (minus mortgage debt), that you generally can’t sell your house without buying another residence of some sort. And many people count their houses as part of net worth.
But I have also come across PF enthusiasts who are way more limited than cars or property, and count only passive income-bearing assets. So no cars, no primary residence, no checking account, no savings account. Only 401k, IRA, other interest-generating accounts, and possibly rental residence income. Interesting.
So overall I’m considering removing my car from my Mint account, but am considering this passive income-only approach. The PF gurus seems to emphasize having only enough savings for an emergency fund and investing all the rest. So theoretically over the long term, the savings wouldn’t factor in highly anyway.
Happy hump day!