Net Worth Primer

I have been debating if I should write this post for a while but since now I am part of the J. Money Bloggers Net Worth list at Rockstar Financial, I feel like I really need to. This is a primer on how I do my net worth calculations, what is included and what is not. Some thoughts on my financial philosophy. A few links that may be of use and some do's and don'ts.

What is included in calculating my net worth?
Not everything to be honest.  Bank accounts, investment and retirement accounts.  Equity in the houses, plural, our residence and 1 rental house.  That is it.  I want to make it easy, I want to be able to calculate a number in a few minutes and I want to be very conservative.

What I do not include are those assets that are hard to value, furniture, jewelry, art, yes I have some and if you knew me that would come as a surprise, or those things that have minimal net value, such as the 3 cars, 2 of which are newer, 1 is a 2000 Honda Accord.  I am not including the ownership in a small business that doubles as my employer.  I own 50% and while it does have value, and has the potential for significant value,  I have no idea how much that would be today and I don't really want to guess.  I am also not including a personal loan in the mid 5 figure range made to friends... more on that later but the shorter version is don't.

So the bottom line is this.  If I had to fire sale everything, sell it all tomorrow...I should have no problem getting at least the number I have listed for my net worth and realistically, I would probably end up with a decent amount more.

Why am I doing this?
Why am I putting my finances online for the world to see?  I enjoy finances, specifically stock market investing.  My wife and I are working hard towards building wealth so we can retire with enough to enjoy life.  This is a way to keep me motivated and maybe pass on some of the information of what has worked for me and almost certainly some things you may not want to do.  Have I mentioned not to loan money to friends?

What are some personal finance places on the internet that I frequent?
-My most common finance related internet site is Yahoo Finance.  Not claiming its the best, its just what I have always used.

-I am also a fequent visitor to MFI Diary  MFI, Magic Formula Investing, is a stock picking philosophy by Joel Greenblatt that I find interesting.  The guy that runs the MFI Diary does a good job of looking at stocks to buy and occasionally that leads me to a buy.

-J. Money's Budgets Are Sexy  The reason I am writing this.  I found J's blog when I was looking for personal investing sites, specifically site by people like me who manage their own stocks.  My hope was to find a couple of sites that talked about stocks of interest.  Glad I found BrS but still looking for stock sites.

-Budgets are  Sexy's sister site Rockstar Finance  A nice collection of personal finance related articles that most of the time I agree with.  Which leads me to...

What is my personal finance philosophy?
Spend less than you make and invest as much as you can.  That about sums it up.

I am about 95% on the same page as Dave Ramsey.  They guy really knows his stuff and goes about life the right way.  We have a couple of differences, mainly the whole investing in individual stocks, but for the most part, we agree.

For the record, I would not advise most people to pick their own stocks.  It is something I have always enjoyed and I think I have the personality and some background to allow me to do the appropriate research but for most people, probably not the best choice.

One more piece of advice, not really personal finance related but a little bit.  Be careful who you pick as friends and who you hang out with.  Being around smart successful people who make good decisions goes a long ways in how your life turns out.  Its something that took a long time for me to truly understand and I try to pass it along whenever I get a chance.

Now about loaning people money... my wife, who is the best human I have ever known, has been friends with a couple for many more years than I have known her.  They would not qualify as the best managers of personal finance and got into some debt at a very high rate.  I had recently come into some cash and was trying to figure out where to put it when I found out about their situation.  They mentioned Dave Ramsey, in fact that is where I first heard about Dave.  They talked about how they were all in on his program etc.  So my wife and I decided to loan them a non insignificant amount of money at a reasonable rate that was significantly less than what they were paying.  Well fast forward and they did not end up following the Ramsey plan.  Now they have been paying me back as scheduled and I am not concerned about getting repaid at this point but if you listen to what Dave says about loaning money... there is a lot of truth to it.


You can follow me on twitter but be warned, that is where I let out my sarcastic fiscal conservative, social libertarian angst.  If you are the type that is easily offended....  Consider yourself warned.