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No assumption necessary. I quoted you, mizzourah2006, directly.
You wrote that you consider mortgage principal payments as an increase in net worth. This is demonstrably false, whether you calculate it once a month or once a second or once a decade. Principal payments are a net neutral transaction for net worth.
Yup, the principal payment vs spending the money results in a higher networth at the time of calculation. I never said it was paying down the mortgage itself that was the cause of the increase.
Yup, the principal payment vs spending the money results in a higher networth at the time of calculation. I never said it was paying down the mortgage itself that was the cause of the increase.
The problem is your point is entirely worthless and carries zero value. Doing anything with the money other than worthless spending is a neutral move to net worth, i.e. Paying down debt, keeping it in your checking account, moving it to an Ira and on and on. With all that the singular option you provided in your a and b scenario is again worthless because it ignores the functionality of the calculation
The problem is your point is entirely worthless and carries zero value. Doing anything with the money other than worthless spending is a neutral move to net worth, i.e. Paying down debt, keeping it in your checking account, moving it to an Ira and on and on. With all that the singular option you provided in your a and b scenario is again worthless because it ignores the functionality of the calculation
Yup, the principal payment vs spending the money results in a higher networth at the time of calculation. I never said it was paying down the mortgage itself that was the cause of the increase.
Why do you keep asserting that which is demonstrably false? Do you really not understand what has been repeatedly explained, or are you just trolling?
It isn't semantics - it's basic accounting. Even if the money is direct deposited, you earned it, and it creates a two part transaction. First, your assets and your net worth increase by the amount of the paycheck, and then your assets and your liabilities decrease by the amount paid on the debt.
Simple. It reduces the liability, and increases net worth. Surely you understand the difference between someone using their own assets to pay down their debt, vs. someone else paying down that debt. The situations are different, and they are accounted for differently.
Sorry, but no matter how you try to spin it, you can't come up with a situation where someone increases their net worth by paying down their debt. It's an IMPOSSIBILITY.
I don't know why you keep bringing in this straw man claim that the net worth at the exact instant in time of the transaction of paying off your debt goes up. I never said that, even once.
I said net worth can increase over a period of time (for example, a year) in which debt is paid off while savings end up unchanged, if the debt was paid by money that you didn't already have at the beginning of the time frame. Note that I am NOT saying that the act of sending money to a creditor is the CAUSE of the increase in net worth, NOR am I saying that at the exact instant the debt is paid off that net worth goes up!
I don't get why this is so difficult - I am simply not saying any of these things!
You also seem to have forgotten that this thread is about annual increases in net worth. That is, how much does it change from one year to the next? If you earn the money and pay the debt in the same year then this question has no relevance at all to the subject of this thread, which is annual changes in net worth.
When you see inventory on a balance sheet, the amount shown has NOTHING to do with what question you are trying to answer.
Neither one of those values will show up on a balance sheet that is prepared in accordance with GAAP. An analyst or an investor looking at the balance sheet may try to calculate those values for himself, but that in no way changes what the correct accounting treatment is for the inventory in question.
Ok, so you want to be hyper-pedantic, I'll give it to you. When we define net worth for a household or person as assets minus liabilities, what is "assets"? Is it "inventory" as it would be defined on a balance sheet, or is it "liquidation value" as it would be defined on a corporation's investor documents?
You are quibbling over a definition, in other words, arguing semantics. I will concede that net worth as commonly understood is not precisely defined, because the term "assets" is ambiguous. This is part of the reason why I earlier said "language is imprecise".
Why do you keep asserting that which is demonstrably false? Do you really not understand what has been repeatedly explained, or are you just trolling?
I guess the OP is trolling then by starting a thread about calculating networth on an annual basis because that is clearly not possible as networth isn't really a thing that can ever be calculated. Technically it is completely fluid and can never be calculated. Today my networth is n, if Jane Doe comes over tomorrow and offers me n+$200k for my house my estimate of my networth tomorrow could increase n + $200k just like the stock market on the last day of the month effects my networth at the time of calculation. So bottom line according to TaxPhD don't ever calculate networth because it isn't actually your networth.
I guess the OP is trolling then by starting a thread about calculating networth on an annual basis because that is clearly not possible as networth isn't really a thing that can ever be calculated. Technically it is completely fluid and can never be calculated. Today my networth is n, if Jane Doe comes over tomorrow and offers me n+$200k for my house my estimate of my networth tomorrow could increase n + $200k just like the stock market on the last day of the month effects my networth at the time of calculation. So bottom line according to TaxPhD don't ever calculate networth because it isn't actually your networth.
Not at all... net worth is always a point-in-time calculation, like weight or BMI.
You can compare two point-in-time calculations, that's not in conflict with what TaxPhD wrote. What someone does along the way doesn't matter, the point of this thread is figuring out the delta between Time X and Time Y.
Not at all... net worth is always a point-in-time calculation, like weight or BMI.
You can compare two point-in-time calculations, that's not in conflict with what TaxPhD wrote. What someone does along the way doesn't matter, the point of this thread is figuring out the delta between Time X and Time Y.
If you would take the time to read and understand other posters points of view, you would realize that you guys are actually saying the same thing.
Last edited by SaucyAussie; 11-25-2016 at 08:15 AM..
Reason: typo
If you would take the to read and understand other posters points of view, you would realize that you guys are actually saying the same thing.
Yup, but they are right, so....
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