personal wealth health

What’s the Value?

Determining the worth of your assets leads to better money management.

WILLIAM J. LYNOTT

Managing your financial life skillfully requires that you have a clear picture of your assets at all times. Whether you’re saving for college tuition for one or more children, a new and bigger home, a comfortable retirement or any reason at all, just guessing at the total value of your assets could lead you to serious disappointment. Calculating the total value of everything you own should be done periodically so that you can track your progress or lack of it.

While the job can be a bit tricky, it’s not difficult. Follow these guidelines:

1 List your liquid assets.

The easiest part of the job is adding up all of your cash including all bank balances, the little kitty you keep stashed away, even the money in wallet or purse.

Now add cash equivalents. These include bank CDs, U.S. Treasury bills, money market accounts and any other investment securities that are highly liquid and readily convertible into cash.

If you are an investor in the stock or bond markets, you have securities that vary in value at any given time. Obviously, the cash value of this portion of your assets can be measured only at a specific time. Thus, each time you calculate the total value of your assets, the date of your calculations must be recorded.

2 Add your hard assets.

While many of your other assets have a marketable or cash value, determining their value can be quite tricky. For example, your home has a market value, but determining that value in this shaky economy is not an easy task, made more difficult by human nature and our tendency to over-estimate the value of our prized possessions. The market crash of 2008 and the subsequent gradual improvement have made it even more difficult. That’s why you should be conservative when estimating the market value of your home, less the amount of your mortgage if you have one. For an estimate of your home’s value, use Zillow (www.zillow.com) and enter your address.

Another asset difficult to value, are the automobiles in your family. Depreciation on autos is quite rapid, causing many owners to place an unrealistic market value on them. Check Kelly’s Blue Book for an estimate (www.kbb.com).

Many other assets have a market value even more challenging to estimate including but not limited to jewelry, household furnishings, hobby equipment, and antiques. As with other non-cash assets, most people tend to over-estimate their market value. That’s why you should try to think of their value only in terms of what they would bring if you try to sell them on the open market. Use eBay or Craigslist to get a better idea.

If you are the owner of a practice, include the net value of the practice in computing your total assets as well.

3 Determine the sum.

Adding up the above gives you the sum of your totals assets. While some may feel that going to the trouble of making a realistic calculation of assets on a periodic basis is an unnecessary bother, skillful money managers know better. When it comes to money management, you can’t know where you’re going unless you know where you’ve been.

Next month, we will deal with liabilities. OM

WILLIAM J. LYNOTT IS A FREELANCE WRITER WHO SPECIALIZES IN BUSINESS MANAGEMENT AS WELL AS PERSONAL AND BUSINESS FINANCE. VISIT WWW.BLYNOTT.COM, OR SEND COMMENTS TO OPTOMETRICMANAGEMENT@GMAIL.COM.