Why Your Net Worth Calculations Are Wrong

...One of the Many Ways....

Net Worth. People are funny about it. Yes, it is good to look at your account growth over time. But we get a chuckle whenever we see someone who is pulling up-to-date housing comps & the blue book value of their cars to get an overly precise number.

Why?

When you are doing a net worth calculation, the first question you need to ask yourself is “why are you trying to calculate your net worth?”

Some of you may be trying to flex on social media. Or you may want to feed your ego by maxing out some number on a spreadsheet that is fictional.

But for those of us who are using a net worth calculation to track our wealth over time, there are a lot of issues with how most sites tell you to calculate your net worth. Namely, they have you showing a fictional number that isn’t your actual value.

Below is an image from Schwab about calculating your net worth assets and it is fairly uncontroversial across the personal finance space.:

So what is wrong with this recommendation?

And is there a major piece of the net worth calculation you are leaving out? (Spoiler: Yes).

Maybe your net worth spreadsheet looks like this.

How much are you likely over-stating your wealth?