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Measuring your net worth including all your assets – what are you leaving out?

Last week at the dinner table my financial philosophy (see about me) was challenged by my two sons, ages 10 and 11.

I’m not sure how it came up but one of them (probably the eldest who aspires to be the next Donald Trump) said it was nonsense that money doesn’t make you happy. “Of course money makes you happier mum, look at all the stuff it can buy you and places you can visit when you have lots of it! You can’t do all that fun stuff when you’re poor.”

When I turned to son No.2 for backup, he took big brother’s position, which is rare. Given both are obsessed with super cars right now, I guess I shouldn’t be surprised. If they won the lottery tomorrow, and were old enough to drive, they’d rush out to buy their favourite racing cars and live happily ever after, so profound is their love for super cars. I had to concede the point. Yes, money can buy happiness but there’s a big BUT to follow. They won’t get it until they’re adults.

What I tried to emphasis in my yoga mum/personal finance guru way was that the happiness money did buy would be limited and that longer lasting, more meaningful happiness, for most, derives from more substantive things, i.e. friends, good health, and loved ones.

Given the choice between being rich and poor, yes I would chose the former and yet it’s impossible to ignore the troubling reality that people much poorer than us living in developing nations are typically the happier bunch. I won’t reopen this can of worms.

Instead, I wanted to look at net wealth and how it is calculated. In pure monetary terms it’s a straight forward calculation. One’s net worth is a figure that is derived by adding up all your assets (house, supercars, investments and other assets) less whatever money you owe on them. Imagine you had to sell everything tomorrow (and pay back the bank too) and then you’ll arrive at a rough figure. If you don’t deduct the money you owe, naturally you’ll have an inflated sense of your net worth. Strip away the debt and get down to what you do own.

Now, because I’m a yogi, I also look at net worth in another way. Let’s call it net self worth or perhaps net wellbeing. Assume for a second you lost all your worldly possessions and assets and all you were left with was the clothes on your back. What would you be worth then?

From a material perspective, you’d be as poor as a pauper but how about the stuff we don’t put a value on?: friends (the true blue ones who show up to help you on moving day), family (those ones who are with you through thick or thin), your good health, your knowledge and skills that you could fall back on to get yourself back up again, your contacts, your attitude, your personality and your all around value as a human being.

You could say your net self worth, is what you are left with when the material assets are stripped away.

We don’t often put a price on these things but really we ought to. Why? Because who you are as a human does count more than what you accumulate and leave behind when you shuffle off this mortal coil. I know, it’s one of those warm and fuzzy statements that hard core capitalists find cringe worthy and laughable.

But ask yourself this and choose for yourself what matters more: stranded on a desert island (that had no hope of being discovered by your rich mate with the speed boat or chopper) who among your peers, friends, and family would you want with you and would you make the cut if the tables were turned.

Funny enough I met a woman this weekend who was a perfect example of someone who appeared to be familiar with both types of net worth. She was a nature loving grandma who was unpretentious as they make ‘em and as sweet and kind as apple pie. Guess what? She drove a Lotus.

I learned an important lesson in meeting Lotus Gran and also in having my entrenched views challenged by my kids.

Supercars and good karma are not necessarily mutually exclusive.

For more tips on balancing money and personal well being, check out my book Money Matters. Available in ebook or by special order.