What is net worth and why does it matter?

[Anonymous]

When you talk about your finances, do you think purely in net worth or something else? Why is net worth a measuring stick of wealth?

[Anonymous]

Anonymous wrote:When you talk about your finances, do you think purely in net worth or something else? Why is net worth a measuring stick of wealth?

I think cash flow is more important. Generally, you can't spend "net worth."

[Anonymous]

Anonymous wrote:

Anonymous wrote:When you talk about your finances, do you think purely in net worth or something else? Why is net worth a measuring stick of wealth?

I think cash flow is more important. Generally, you can't spend "net worth."

I agree. I see the term net worth used a lot. I did a calculator of net worth and while the number seemed large, the money in my bank account says differently. I think cash matters most.

[Anonymous]

This is the poster who ends every incendiary question with a very passive aggressive question mark, challenging him/herself to get the most thread responses. Look back....every incendiary and unnecessary question asked on this listserve sounds a lot like this question.

It's not a person asking for advice or guidance or venting, it's just a bored person looking to incite a nasty debate. I guess you call that person a troll. I am not going to feed it.

[Anonymous]

I agree that net worth is not a meaningful concept. There are really separate questions about how you will pay for college, retirement, where you will live, who you will have to support etc. yes, money is fungible, but a net worth of a million is great if you are a spinster in Iowa, but not so good if you are a 60 year old in dc with four kids about to enter college, a SAHM wife, and two elderly parents that you need to support.

[Anonymous]

Anonymous wrote:This is the poster who ends every incendiary question with a very passive aggressive question mark, challenging him/herself to get the most thread responses. Look back....every incendiary and unnecessary question asked on this listserve sounds a lot like this question.

It's not a person asking for advice or guidance or venting, it's just a bored person looking to incite a nasty debate. I guess you call that person a troll. I am not going to feed it.

OP here. No, it isn't meant to be a debate. A discussion, yes. I see "net worth" thrown around a lot on the board & was wondering what it meant to different people. I see debates breaking out over less trivial things than net worth on this site - like how much to tip a taxi driver. I think anyone could be labeled bored for even being here, though, so maybe I'm bored.

[Anonymous]

Net worth is everything.

[Anonymous]

Anonymous wrote:Net worth is everything.

+1 We are high income, but only recently and we just got out of debt from student loans. Our net worth is not what a person might expect if they just saw our income. Income can change in the blink of an eye, but money you've saved/invested is yours even if your circumstances change.

Similarly, a person who makes $100k and saves $15k is in a better position than someone who makes $500k and spends $499k.

Long story short: it's not what you make, it's what you keep.

[Anonymous]

Anonymous wrote:This is the poster who ends every incendiary question with a very passive aggressive question mark, challenging him/herself to get the most thread responses. Look back....every incendiary and unnecessary question asked on this listserve sounds a lot like this question.

It's not a person asking for advice or guidance or venting, it's just a bored person looking to incite a nasty debate. I guess you call that person a troll. I am not going to feed it.

How are either of those questions incendiary? Or passive aggressive for that matter?

[Anonymous]

Anonymous wrote:

Anonymous wrote:When you talk about your finances, do you think purely in net worth or something else? Why is net worth a measuring stick of wealth?

I think cash flow is more important. Generally, you can't spend "net worth."

I agree - in terms of cash flow we're poor. In terms of net worth, we're rich. It's very confusing.

[Anonymous]

Anonymous wrote:Net worth is everything.

This. We are low income but are considered UHNW.

[Anonymous]

Net worth is the key to Financial Independence, which is the goal

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:When you talk about your finances, do you think purely in net worth or something else? Why is net worth a measuring stick of wealth?

I think cash flow is more important. Generally, you can't spend "net worth."

I agree - in terms of cash flow we're poor. In terms of net worth, we're rich. It's very confusing.

Did u deduct what u owe from your assets? U can sell assets in your net worth to turn into cash flow.

[Anonymous]

Anonymous wrote:When you talk about your finances, do you think purely in net worth or something else? Why is net worth a measuring stick of wealth?

I have no idea what mine is. I have a vague idea. We invest via direct deposit each month, I've faithfully been maxing out my 401k since age 22 , have backdoor roths, and have 2 investment properties. I know I will have enough to retire, send my kids to college, and leave some money behind when I die.

As far as knowing my net worth? No. I go over these things on an annual basis when we meet with our CPA to do taxes.

[Anonymous]

It's helpful to know. We are facing massive medical costs this year, and I know our net worth (~$2M), and we're in our mid-40s, so I feel OK dialing back retirement saving this year to increase our takehome (increase our cash flow) temporarily to cover all these medical bills. Because I know our net worth I'm comfortable that we'll be OK for college and retirement if we stop contributing for a year.