A couple of weeks ago I asked whether I should ditch the earmarks or not in my net worth and personal finance tracking spreadsheet.
The comments that I got, along with looking at how others calculate net worth, validated what I had previously thought: The earmark solution I had was simply too complicated.
My original premise for earmarks was that I wanted to reduce the effect of major spending on my net worth. It made sense at the time, but the benefits simply weren’t there.
So, I decided to get rid of most of them. It was actually pretty easy to remove the earmarking that I’d done in the past, so by removing the entire earmarking history, I was able to still paint a complete picture, and also have good data when comparing progress year over year.
It’s a lot simpler spreadsheet now.
I do still have a couple of, what I guess you could consider, earmarks or write-downs:
- Home value / expected selling costs – My philosophy on net worth is to determine what we could have if we were to liquidate our assets. As such, I write down about 7% of the value of our house as selling our house would incur realtor fees, transfer fees, and other associated costs.
- Car values – We have two cars and I use Kelly Blue Book estimates to set the values on a monthly basis. We actually bought one car at below market value (thanks to the generosity of my parents), and since I didn’t want to realize a net worth ‘spike’ as a result of their generosity, I only count the value up to what we paid for it. Since the vehicle continues to lose value as it ages, eventually these numbers will meet and this will no longer be necessary.
This is a lot less complicated than it used to be and I think paints a pretty accurate view of where we stand.
Thanks to those who provided feedback.