Quote:
Originally posted by Dueller
One of the falalcies about looking at traditional net worth is that many people's largest "asset" is the equity in their home. Problem is that its not a liquid asset...except maybe to your heirs. Thus a high net worth may make you feel good and fuzzy but it is a largely inaccurate picture of your financial health if you have no liquidity. A better measure might be a question of "How long can I enjoy my desired lifestyle if I weren't working?"
I can't remeber which financial guru came up with it, but he assessed persoanal financial health by defining assets as those things that put money in your pocket vs liabilities as those things that take money out of your pocket. Thus, a home is not an asset per se since it takes money out of your pocket thru mortgage, taxes, insurance, etc.
Viewed from that angle, a more realistic picture emerges.
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Good points all..Bob Brinker (Money talk,
www.bobbrinker.com )
calls the ability to live the desired lifestyle without working "critical mass". I call it having "screw you" money. Money that allows you to say "screw you" to anyone you wish. Without working, of course. Some with "critical mass" enjoy working. Some don't.
Some people with lots of toys, a McMansion, etc. are running like crazy, just trying to keep up with the payments. Others living in a modest home in a quiet neighborhood could write checks for the toys and the McMansion if they wanted these things, but other aspects of life are more important to them. Having money gives one more choices. Some choose wisely, some don't.