In the financial independence community, net worth means everything – or if not everything, it means a lot. When I started this blog five years ago, I actually went into it intending to regularly track and share my net worth each quarter. I ended up writing two quarterly net worth posts before I ultimately shelved the entire exercise (you can read them here and here if you’re so inclined).
The problem for me is that I’ve never really been someone that tracks my net worth. I use Mint and Personal Capital to track my finances and investments, so I always have a general sense of my net worth, but I don’t really track it monthly or quarterly as some people do.
The reason for this isn’t that I think net worth isn’t an important thing to know. It gives a nice, generalized barometer of how you’re doing financially. With enough data and time, you can get a decent sense of where you’re headed. Ideally, you want to see things moving in an upward, positive trajectory.
The thing is, I’m not really sure how important knowing your actual net worth is. To me, net worth has always felt like more of a vanity exercise, a way to compare yourself to someone else based on a number. We’re all human. And if there’s one thing I know people like doing, it’s trying to rank and compare things that really can’t be compared easily (see things like the US News school rankings, Forbes lists, Vault 100 law firm ranking lists, etc).
Here’s the interesting thing. As simple as you’d think calculating your net worth would be, it’s actually not quite so simple. There’s no clear consensus on what you’re supposed to include or not include. In many ways, it’s our decision about what to include or not that determines our net worth. Include fewer things and your net worth will be lower. Include more things, and your net worth will be higher. I feel like it lends more credence to my belief that net worth is often more about making us feel good.
My Net Worth – What Do You Include And What Don’t You Include?
The basic definition of net worth is simple – to get your net worth, take your assets and subtract your liabilities. What’s left is your net worth. The problem is, most people (myself included) aren’t really sure what counts as an asset.
We can take a look at my net worth to get a sense of how your net worth can fluctuate pretty dramatically depending on how you look at it.
In the financial independence community, it often seems like most people view their net worth as consisting of their cash and investments (in both taxable and tax-advantaged accounts). When I was writing this post, coincidentally, my friend Money Wizard also happened to write a post about why he doesn’t include his house in his net worth (and I swear I started writing this post before he published his post, so it was a coincidence that we both happened to write about net worth stuff at the same time).
When you include my cash and equity investments, minus the student loans my wife still has, we end up with a net worth of around $500,000. I’m 34 years old, and while I’m not as far ahead as many people in the financial independence community, I’m obviously better than most people.
That’s the most basic look at my net worth. But it leaves out a lot of assets I do own. Houses. Furniture. A car. Bikes. Businesses. These are all things that go on the asset side of the balance sheet because they do have monetary value. And if you add these things into the equation, my net worth can change dramatically.
Do You Include Houses In Your Net Worth?
I recently bought a new house. It’s an expensive house too – in the million-dollar range. My wife and I have a combined household income that makes it possible for us to afford a house like this, but we know it’s a lot of money to put into anything and it could very well be a huge mistake (we don’t know the future, so anything we do can only take into account what we know now and what we guess the future will hold).
Buying this house meant we needed to put down about $200,000 for our downpayment. We’ve had this cash saved up for several years and it was something that we would have likely considered as part of our net worth if I had been tracking it. After all, we didn’t need to buy a house, so that money was always there for us to use however we saw fit.
The question now is, after buying our house, what happened to our $200,000? Is it gone? You could argue we spent it, but that’s not exactly right. We bought a house. It’s not like we bought tickets to Disney Land. The money might not be easily accessed and we might not be able to get all of it back, but we could get at least some of it back if we wanted.
We also have our old house that we’re converting into a rental property. We lived in this house for 5 years and owned it for 11 years. It’s built up a lot of equity in that time. Conservatively, it has at least $150,000 in equity. More likely, it’s closer to $200,000 of equity. Most people would agree that rental property is different compared to your primary residence. So, after converting it into a rental property, do we now count the equity we’ve built up in that property?
If you include these two properties into the equation, suddenly, my net worth jumps from $500,000 to $850,000. That’s a pretty big jump without doing anything.
Do You Include Businesses In Your Net Worth?
Including the equity of a rental property in your net worth is essentially like including a business in your net worth. That leads me to another question – how do you think about businesses when it comes to your net worth?
This is a real question for my family. My wife owns her own practice and I own this blog. Both of these are real assets – they require work and they generate income that accounts for almost all of our household income. Most people wouldn’t include these sorts of businesses into their net worth. But why not? They’re real assets with real value. When we look at the net worth of the world’s richest people, almost all of it comes in the form of business equity.
My blog was built on sweat equity, so I don’t have any direct money tied up in it. And while it probably wouldn’t sell as easily as other businesses, it could likely be sold to someone for some amount of money.
Meanwhile, my wife bought her practice from a retiring dentist for a significant amount of money. She took out a 10-year loan to purchase the practice and is now 7 years away from paying it off. Because it’s a relatively short loan, it means she’s built up a decent amount of equity into her practice. She also has associate dentists that may want to buy into her practice one day. The practice has a real value that can be sold – and indeed, part of it may be sold one day if she takes on partners.
So should we count this in our net worth?
So Am I A Millionaire?
If you add in the value of our businesses, our household net worth jumps to over a million dollars. This is based on a simple calculation of what our assets are worth minus our liabilities. That’s a pretty big jump – going from half a million to a million just by including a few extra things.
So am I a millionaire at 34 years old? I’m not really sure. If you asked me, I’d say I’m not. At our current savings pace, I think we’ll get to “real” millionaire status by our early 40s. And this is without doing a lot – just earning a good income and putting as much money as we can into our retirement accounts.
But you can see what I mean about net worth and how it can be gamed to suit whatever you want it to say about yourself. I like to play it safe on the net worth front, so I usually only count my cash and my investments. Often, I don’t even count my cash when thinking about my net worth since I think of my cash as something I might spend soon. But if I’m feeling bad about myself, I can always say I’m a millionaire too just by counting other things that are more on the fence.
What’s Your Net Worth – You Can Decide
After writing this post, I see a few ways you can think about your net worth. These range from a more conservative view of net worth to a more aggressive view.
- Conservative. Only include immediately accessible assets. These include cash and taxable accounts. I think very few people will opt to think of their net worth in this manner, but if you do think of it this way, you’re going to feel broke, but you’ll also probably end up with more money than you know what to do with.
- Normal. Include all cash and investment accounts. I think this is how most people think of their net worth. They include their cash plus all taxable and tax-advantaged accounts. This is how I generally think of my net worth when I’m thinking about how I’m doing financially.
- Normal + Real Estate. If you want to inflate your net worth a little bit or want to feel a little better, include the equity you have in your real estate. You can get a general sense of what your home is worth from Zillow. As you can see from my own net worth, if you include these numbers, your net worth can jump dramatically. If you want to be more conservative in this area, maybe you only include the downpayment you put on your house. After all, that’s real money that was part of your net worth and didn’t just disappear.
- Normal + Real Estate + Businesses. If you really want to push your net worth higher, go ahead and add your businesses. Some businesses are more liquid than others. Brick and mortar businesses likely have inherent value. A website that generates income should have some value too. If you add your businesses into your net worth, you’ll probably feel really good about yourself.
If you’re feeling really bad about yourself after adding all of these things, go ahead and add the value of your cars, bikes, furniture, and everything else you have in your house. These are things with real value too. You probably even have insurance for them in the form of home insurance or renters insurance.
The point is, there are a lot of ways to think about net worth, and depending on what you decide to count or not count, your net worth can feel really low or really high. I didn’t even realize that I could technically be considered a millionaire until I wrote this post.
I want to be more conservative, so I go with the “normal” approach to net worth, which is counting my cash plus my investments. That means I still have a long way to go, which is fine with me. But if I want to feel good about myself, I can always add in my real estate and businesses. That’s the thing about net worth, I think. It’s really up to you to decide what it is.
More Recommended Ebike/Scooters
Check out these other ebikes and scooters I've reviewed:
- Urban Arrow Ebike – Last year, I made one of the largest purchases I’ve ever made – I bought a $9,000 electric cargo bike from Urban Arrow. In my Urban Arrow review, I will discuss what it is and why I decided to buy this bike, as well as discuss how impactful a bike like this can be on your journey to financial independence.
- Troxus Explorer Step-Thru Ebike – The Troxus Explorer Step-Thru is a fat-tire ebike that I’ve had the pleasure of riding for a while now. It has amazing power, great looks, and awesome range. If you’re looking for a great fat-tire ebike that offers a lot for the price, the Troxus Explorer Step-Thru is definitely one for you to consider. Check out my Troxus Explorer Step-Thru Review.
- Hovsco HovBeta Ebike – The HovBeta is a folding ebike with great specs and a lot of interesting features, and importantly, it’s sold at a good price point. I’ve had a blast commuting with it and using it to do deliveries with DoorDash, Uber Eats, and Grubhub. Check out my Hovsco HovBeta Ebike Review.
- Vanpowers Manidae Ebike – The Vanpowers Manidae is a fat tire ebike that I’ve been riding as my primary winter commuting bike and have also been using it to do food delivery with apps like DoorDash, Uber Eats, and Grubhub. After clocking in a decent number of miles with this ebike, I wanted to write a post sharing what my experience with the Vanpowers Manidae ebike has been like. Check out my Vanpowers Manidae Review.
- Sohamo S3 Step-Thru Folding EBike Review – A Great Value Folding Ebike – The Sohamo S3 Step-Thru Folding Ebike is an entry-level folding ebike that offers a lot of value for the price point. I’ve been riding the Sohamo S3 for a while now, putting the bike through its paces, and I have to say, this bike has exceeded all of my expectations. Check out my Sohamo Review.
- KBO Flip Ebike – The KBO Flip is an excellent bike. I’ve had a great time riding it and think it’s a versatile bike that can be used for a lot of purposes and can fit a variety of lifestyles. It’s worked out great for me as a general commuter bike and as a food delivery bike. Check out my KBO Flip Review.
- Hiboy P7 Commuter Ebike – The Hiboy P7 is an excellent electric commuter bike that’s offered at an affordable price point. The range and speed of this bike are both very good, so you won’t have any trouble getting anywhere you need to go with it. As a food delivery vehicle, this is also good – with how much range it offers, you’ll be able to work all day on a single charge. Check out my Hiboy P7 Commuter Electric Bike Review.
- Himiway Escape Ebike – The Himiway Escape is an interesting bike for anyone looking for a moped-style ebike. If you’re a gig economy worker, the Himiway Escape is particularly interesting and it’s possible to think of it as an investment, especially if you can opt to do deliveries with the Himiway versus using a car. It’s not cheap, but you can definitely make your money back when you compare the mileage you’ll put on your car versus using an ebike. Check out my Himiway Escape Bike Review.
- Espin Sport Ebike – The Espin Sport is a good ebike for someone who is looking for an ebike that feels and rides more like a regular bike. There are many ebikes that are really only bikes in name. In reality, they’re basically electric mopeds. The Espin Sport, by contrast, is a bike you could probably ride without the battery and you’d feel like you’re just riding a regular bike. Check out my Espin Sport Review.
- Varla Eagle One Scooter – The Varla Eagle One is an excellent scooter that can make sense for a lot of people. It can work as a primary mode of transportation. You can use it to work on gig economy apps like DoorDash, Uber Eats, and Grubhub. And it can also be a recreational vehicle if you’d prefer to use it for that. Check out my Varla Eagle One Review.
- Varla Falcon Scooter – The Varla Falcon is an excellent scooter that offers a good amount of power at a lower price point compared to more powerful scooters. It’s not exactly an entry-level scooter, nor is it a high-powered scooter. I think it fits somewhere in-between those two categories – an intermediate scooter if I had to give it a category. Check out my Varla Falcon Review.
- Hiboy S2 Scooter – The Hiboy S2 is an excellent entry-level commuter scooter that's perfect for someone looking to save some money in transportation costs and improve their commute. Check out my Hiboy S2 Review.
- Hiboy S2R Scooter – The Hiboy S2R is one of the more interesting electric scooters I’ve been able to test out. It’s not a high-powered scooter, but for an everyday transport option, it’s very useful, especially given some of the unique features that it has. Indeed, for the price, the Hiboy S2R might be the best value scooter I’ve used. Check out my Hiboy S2R Review.
- Fucare H3 Scooter – The Fucare H3 is a fun scooter and I’ve enjoyed testing it out. For a daily commuter or quick trips or errands, the Fucare H3 is probably the scooter I’ll use. It’s portable and easy to maneuver, so it’s just easier to take on the road when I need it. Check out my Fucare H3 Scooter Review.
More Recommended Investing App Bonuses
For additional investing app bonuses, be sure to check out the ones below:
- M1 Finance ($100) – This is a great robo-advisor that has no fees and allows you to create a customized portfolio based on your risk tolerance. You also get $100 for opening an account. Check out my M1 Finance Referral Bonus – Step-By-Step Guide.
- Webull (20 free stock shares) – Webull's current promotion gives you 20 free shares valued between $3-$3,000 each if you open an account using my referral link. Here’s a guide I wrote about how to earn your free shares using Webull.
- Moomoo (15 free stocks) – Moomoo is a free investing app currently offering 2 different referral bonuses if you open an account using a referral link. Read my Moomoo referral bonus guide for more information.
- Robinhood (1 free stock) – Robinhood gives you a free stock valued between $2.50-$225 if you open an account using my referral link.
- Public (1 free stock) - Public gives you a free stock valued between $3-$70 if you open an account using my referral link.
- SoFi Invest ($25) – SoFi Invest is an easy brokerage account bonus that you can earn with just a few minutes of work. Use my SoFi Invest referral link, fund your SoFi Invest brokerage account with $100 and you’ll get $25 of free stock. I also have a step-by-step guide for the SoFi Invest referral bonus.
More Recommended Bank Account Bonuses
If you’re looking for more easy bank bonuses, check out the below options. These bonuses are all easy to earn and have no fees or minimum balance requirements to worry about.
- Upgrade ($150) – Upgrade is a free checking account that’s currently offering a $150 referral bonus if you open an account and complete a direct deposit. These bonus terms are easy to meet, so it’s well worth doing this bonus as soon as you can. Here’s a post I wrote with more details: Upgrade $150 Referral Bonus – Step By Step Directions.
- SoFi Money ($275) – SoFi Money is a free checking account from SoFi. They’re currently offering a $25 referral bonus if you open a SoFi account with a referral link and deposit $10. You can also make an additional $250 as well if you complete a direct deposit. This is a good bank that is also 100% free, so you won’t have to worry about managing this account. Here’s a post I wrote with instructions on how to earn your SoFi Money bonus: SoFi Money Referral Bonus: Step By Step Guide.
- Chime ($100) - Chime is a free bank account that offers a referral bonus if you use a referral link and complete a direct deposit of $200 or more. In practice, any ACH transfer into this account triggers the bonus. This bonus is easy to earn and posts instantly, so you’ll know if you met the requirements as soon as you move money into the account. I wrote a step-by-step guide on how to earn your Chime referral bonus that I recommend you check out.
- US Bank Business ($800) – This is a fairly easy bank bonus to earn, since there are no direct deposit requirements. In addition, you can open the Silver Business Checking account, which comes with no monthly fees. Check out how to earn this big bonus here.
- Fifth Third Bank ($350) – This offer is limited to customers in the following states: Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, North Carolina, Ohio, Tennessee, West Virginia, and South Carolina. If you don’t live in one of those states, you won’t be able to open an account online but you can still open an account in-branch if you happen to be visiting a city that has a branch. This is a fairly easy bank bonus to earn, especially since there are plenty of data points showing what will trigger the direct deposit requirement. In addition, you can open the Fifth Third Momentum Checking bank account, which comes with no monthly fees or minimum balance requirements. Read my guide on this bonus here.
- GO2Bank ($75) - GO2Bank is an easy bank bonus that I recommend people take advantage of if they have an easy way of meeting the direct deposit requirement. I like that it’s easy to open the account and that the bonus pays out quickly. Check out my step-by-step guide on how to earn your GO2Bank $75 referral bonus.
- Current ($50) – Current is a free fintech bank that’s offering new users a $50 referral bonus after signing up for an account using a referral link. Current is an easy bonus to earn and also gives you access to three savings accounts that pay you 4% interest on up to $2,000. That means you can put away up to $6,000 earning 4% interest. That’s very good and makes Current an account I recommend to everyone. Check out my step-by-step guide on how to earn your Current Bank bonus.
- Netspend ($40 + 5% Interest Savings Account) – Netspend is a company that provides 5% interest savings accounts. If you sign up using my referral link, you’ll get a $40 signup bonus once you make your first deposit into your Netspend account of $40 or more. That means you get a 5% interest savings account and a free $40 to start! Make sure to check out my in-depth guide on how to set up these accounts.
- Digital Federal Credit Union ($20) – Digital Federal Credit Union (DCU) is a free, nationwide credit union that I recommend to readers for two reasons. First, DCU has a $20 referral bonus if you open a free DCU checking account with a referral link. Second, DCU has a saving account that gives you 6.17% interest on your first $1,000. Check out my in-depth post on how to set this account up.
- Novo Bank ($40) - Novo bank is a free business checking account that’s currently offering a $40 bonus if you open a Novo business checking account using a referral link. In addition to being a good bank bonus, Novo is also a good business checking account. It has no monthly fees or minimum balance requirements and operates a good app and website. Indeed, it’s the business checking account I currently use for this blog. Check out my post on how to easily open a Novo account.
- Varo ($30) – Varo is a free fintech banking app similar to Chime or Current. It’s currently offering a $30 bonus to new users that open a new Varo account with a referral link. The bonus for this bank is very easy to meet, all you need to do is spend $20 within 30 days of opening your Varo account. Check out my step-by-step guide to learn how to earn this bonus.
Kevin is an attorney and the blogger behind Financial Panther, a blog about personal finance, travel hacking, and side hustling using the gig economy. He paid off $87,000 worth of student loans in just 2.5 years by choosing not to live like a big shot lawyer.
Kevin is passionate about earning money using the gig economy and you can see all the ways he makes extra income every month in his side hustle reports.
Kevin is also big on using the latest fintech apps to improve his finances. Some of Kevin's favorite fintech apps include:
- SoFi Money. A really good checking account with absolutely no fees. You'll get a $25 referral bonus if you open a SoFi Money account with a referral link, and an additional $250 if you complete a direct deposit.
- 5% Savings Accounts. I'm currently getting 5.25% interest on my savings through a company called Raisin. Opening a Raisin account takes minutes to complete, it's free, and all of your funds are FDIC-insured. I explain how it works, why I'm now using it to store my emergency fund and any other cash savings I have, and why I recommend everyone check it out in this review.
- US Bank Business. US Bank is currently offering new business customers a $800 signup bonus after opening a new account and meeting certain requirements.
- M1 Finance. This is a great robo-advisor that has no fees and allows you to create a customized portfolio based on your risk tolerance. You also get $100 for opening an account.
- Personal Capital. One of best free apps you can use to monitor your portfolio and track your net worth. This is one of the apps I use to track my financial accounts.
Feel free to send Kevin a message here.
Gamifying the net worth is one of the motivating factors for me. A lot of people wrongly look at their 401k as something that takes money from their paycheck rather than adds value to their net worth. I use two different versions of my net worth–one on Mint that includes crytpo investments, vehicle, other possessions, and one on Personal Capital that only includes investment accounts.
Hi, Kevin, I tried to open a service credit union account, but your link is to Starbucks, I left the comment in your blog with name of ” getting more from my emergency fund…..”, Maybe it is an old blog, so you did not know that, I sent comment here to bring it into your attention, could you please reply to that comment? Thank you
I think it is wrong to say that if you include house/business, then your net worth jumps dramatically. It is more like if you DON’T include them, you will have dramatic jumps.
The $200,000 that you did as a down payment for your house, for example, just poof disappears out of your net worth when you buy the house? No, you add the value of the asset and the liability of the mortgage to your accounting system on the same day, so your down payment remains represented as the difference between the two…the equity.
You should be periodically assessing how much your assets/businesses are worth and record appreciation/depreciation on a regular basis.
I feel that your net worth should only be calculated one way.
If you died today, what is the value of everything after it’s liquidated minus everything that is owed.
I feel that is your true wealth.
Really great post. I totally agree with you. I track our net worth monthly, but solely as a way to track our progress and pat ourselves on the back, since sometimes random expenses can get so frustrating that we need a little encouragement. I don’t actually delude myself into thinking it means much, nor would I ever share it or brag about it. Because I know full well it doesn’t mean squat :). I do include rental real estate, but not the house we live in, because rentals truly are investment assets that could be completely cashed out. What’s funny is that, like you said, if I subtract the rental real estate and tax-advantaged retirement accounts — because none of these are particularly liquid at this point — our net worth is tiny! It’s still helpful to see the full picture though, keeping in mind that it’s a little misleading.
I love the breakdown here of the gameability of Net Worth!
And I largely get why many folks are more conservative and do not include their primary home, cash, or business.
But the fact is assets are assets. I personally like to break it all down, but then spit out the various liquidity of the assets. This includes my primary home and any business that I know a general reasonable value of. Like Sam said, I like to know what the entire picture is.
This way if things were dire, we could always sell our primary home, and rent. This would free up a large amount of cash that could be invested, or even lived off of if necessary. This would be a nightmare type scenario, but it is an option. And I like options!
All that said, I also track my “normal” net worth to really assess the viability of the 4% rule working for me. This is the practical, how long can my actual investments and cash last for me.
Anyways, you are doing great, and your business have real value. Maybe you don’t want to get your hopes up and I get that, but in the future they’ll come into play I am sure.
Net-worth component parts is always an interesting issue for me. I use your “normal” approach. I don’t include my blog (probably because its worth is shy of about a dollar . . . if I’m being exceedingly generous). Nor do I include my business because as I’m the board, CEO, sole employee, janitor, HR/IT/Finance/Marketing department, etc., I probably couldn’t sell it even if I wanted to. As we no longer own any real estate, there’s no question as to whether or not to include it. I wouldn’t even bother trying to value and include the net worth of our tangible personal property. As for accounts, the only ones I’ve ever wavered on whether to include or not are the 529s for our kids. Hasn’t really been too much of an issue as I’ve always ended up on the side of not including them.
Another question: how to account for taxes eventually owed on tax deferred accounts (401k, IRA, etc)
I use personal capital too. For me it’s more about keeping a watch on the direction rather than the actual number. It’s also more convenient than logging into multiple sites. I retired early around the same time as a blogger who frequently posts his numbers. His networth has gone up much more than mine, but I don’t care…he’s doing a lot of things differently than I. He “works” harder than I do. He invests more aggressively. I’m sure we will both be fine.
FWIW: I don’t include the equity of our nearly paid off house because I gotta live somewhere. I don’t really know how much it’s worth and have no plans to sell or take a loan against it. If the “value” suddenly doubled or dropped by 50% my life wouldn’t change. The remaining mortgage wouldn’t change either, so it’s value has no real meaning to me. Perhaps home equity has more meaning for those who have a large mortgage or plan to use its equity.
Panther, applying simple assets-liabilities, you are a millionaire. thats most accurate in my opinion.
Conservative is probably best. However, depending on your net worth, it’s also good to have as accurate of net worth as possible for estate planning purposes.
I think it’s incredible when you can afford a $1 million plus property based on your current income. This is especially true given you didn’t have to sell your old home to come up with a down payment.
It helps put my situation in perspective, because I always feel like I need to invest more and make more to take care of my family. But maybe all of it is overrated, and I really don’t need as much as I think I do.
Have you shared before how much your wife makes? No worries if not. It would help paint or clear picture though.
No matter how hard I try, I have been unable to convince my wife to go back to work since 2015. Therefore, there is extra pressure on me to make sure our finances will survive.
Thanks,
Sam
Hey FS,
Yeah, we are fortunate. I’ve never shared how much my wife makes because we’d rather not have that out there – actually haven’t really shared my own income or household income either. I really only share the gig economy income that I make each month.
As most people can probably imagine, a dentist/lawyer combo makes a really high household income. This obviously makes our finances much easier. Combine that with how frugal we’ve been over the past decade and money can really pile up. Just to give an example of how low our expenses generally have been, our mortgage for the past 5 years has been around $850 per month. In some places, people probably spend that much per month just on going out to eat or buying groceries.
My wife is the primary breadwinner in our family, so there’s pressure on her as well to earn. Since she owns her own practice though, it’s sort of a different pressure, if that makes sense.