4 ms·

I disagree. Net worth is an unstable data point and I always view it as a status symbol more than a realistic means of acquiring cash. For example in a market

I disagree. Net worth is an unstable data point and I always view it as a status symbol more than a realistic means of acquiring cash. For example in a market where nobody is willing (or able) to buy your home, your net worth can be ... well, worthless. In a financial crisis it's even worse. Your "on-demand" cash is what's in your checking or savings account. There's no guarantee you'll be able to tap into your home, car, 401K, etc. and even if you could, in the long term it may be more damaging to you. For instance in a city like Seattle if you sell your home, you could be looking at paying double or triple your previous mortgage in rent, so you're ultimately putting yourself in a worse position.

icedchai 8y ago
This is why you invest outside of retirement accounts. Your on-demand cash isn't getting much, if any, return. Your home equity and retirement funds are expensive to access.
- madengr 8y ago
  Though retirement funds are usually exempted from lawsuits. If you are sued for medical debt, they can’t touch your retirement funds.
chimeracoder 8y ago
> For example in a market where nobody is willing (or able) to buy your home, your net worth can be ... well, worthless No, because if it's true that nobody is willing to buy your home, your home isn't worth the $300,000 you're claiming it is. There's no single metric that works for all situations, but net worth is the best way to compare financial health between people and across a population in a meaningful way.
- johnmaguire2013 8y ago
  It may be worth $300,000 today, but after the next mortgage crisis, it may be worth a fraction of that. Similarly, for your investments, if the stock market takes a huge hit, your net worth will instantly become a fraction of what it currently is. Cash will still be cash. (But also maybe worth less!)
  - chimeracoder 8y ago
    > It may be worth $300,000 today, but after the next mortgage crisis, it may be worth a fraction of that. Similarly, for your investments, if the stock market takes a huge hit, your net worth will instantly become a fraction of what it currently is. Cash will still be cash. (But also maybe worth less!) There is no asset (including cash) that is guaranteed to preserve its value across arbitrary amounts of time under all circumstances. Even TIPS could theoretically be worthless if the government collapses. That doesn't mean that net worth isn't still an excellent normalized comparison between arbitrary people or parts of a population today, which is exactly what we're talking about.
sf_rob 8y ago
You're correct in your criticisms of net worth, but that doesn't change that the use of savings accounts to estimate accessible savings is highly questionable, especially in the past few years when rates were hovering right above checking account rates and people got out of the habit of using them (anecdotal).

icedchai 8y ago

This is why you invest outside of retirement accounts. Your on-demand cash isn't getting much, if any, return. Your home equity and retirement funds are expensive to access.

madengr 8y ago
Though retirement funds are usually exempted from lawsuits. If you are sued for medical debt, they can’t touch your retirement funds.

chimeracoder 8y ago

> For example in a market where nobody is willing (or able) to buy your home, your net worth can be ... well, worthless No, because if it's true that nobody is willing to buy your home, your home isn't worth the $300,000 you're claiming it is. There's no single metric that works for all situations, but net worth is the best way to compare financial health between people and across a population in a meaningful way.

johnmaguire2013 8y ago
It may be worth $300,000 today, but after the next mortgage crisis, it may be worth a fraction of that. Similarly, for your investments, if the stock market takes a huge hit, your net worth will instantly become a fraction of what it currently is. Cash will still be cash. (But also maybe worth less!)
- chimeracoder 8y ago
  > It may be worth $300,000 today, but after the next mortgage crisis, it may be worth a fraction of that. Similarly, for your investments, if the stock market takes a huge hit, your net worth will instantly become a fraction of what it currently is. Cash will still be cash. (But also maybe worth less!) There is no asset (including cash) that is guaranteed to preserve its value across arbitrary amounts of time under all circumstances. Even TIPS could theoretically be worthless if the government collapses. That doesn't mean that net worth isn't still an excellent normalized comparison between arbitrary people or parts of a population today, which is exactly what we're talking about.

sf_rob 8y ago

You're correct in your criticisms of net worth, but that doesn't change that the use of savings accounts to estimate accessible savings is highly questionable, especially in the past few years when rates were hovering right above checking account rates and people got out of the habit of using them (anecdotal).