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Net Worth Calculation (Accrued Time Value)

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rated:
I am updating my net worth calculations and have some questions of what can be and cannot be included in it.

Part -1 

1. At my place of employment, I have accrued time (benefit) that's worth about $45k. It's earned time that was accumulated in the past. They hold 100% cash value and can be cashed when leaving the employer at the final pay rate. Should this amount be included in my net worth calculation?
Part -2 
Numismatics I am referring to certified classic coins (1933 or older) that people collect NOT bullion. There are companies like PCGS and NGC that guarantee, authenticate and grade these coins and encapsulate them to be market acceptable and trad-able.There is an active market for those where auctions takes place almost every week. The market has been strong in the last several months.

If you had spent money to collect these coins (gold and silver classics) in the $100k range. I am in early 30s and I might hold it for another 25+yrs, unless my children show interest in them.

  1. Is it prudent to include your certified numismatic collection/s (fair value or say 75% of market price) in your net worth?
  2. Anybody have (or know of) if these certified numismatics collections be used as a collateral for any loans?
  3. If you are a collector, how to treat this asset? (I know its worth how much someone is willing it to buy it, but there is an active market, at least now.)
     

Thank you!

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The ERISA protections for 401Ks and the legislative fixes for IRAs generally make them judgment proof.  Depending on you... (more)

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I have two values on the bottom line of my spreadsheet.  The first is my actual net worth.  The other is what I'd have l... (more)

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Your employer going belly up is probably unlikely. I would be much more worried about losing my accrued vacation because... (more)

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rated:
The coin dealer forums are going to be better for this. Like any asset, mark it at what you can liquidate it for now, not what you think it's worth. There might be a bank that would lend on it, but I can't imagine it being at attractive terms like a house or a car with titles.

rated:
Is this an investment or a hobby?

rated:
Since this is for personal consumption, do whatever makes sense to you as long as you understand and interpret the final figure you arrive at.

Roughly, what fraction of rest of your assets do each (coin collection, leave encashment) represent? If it is less than 5-10%, I would leave it out, just to be on the conservative side. If it represents a significant fraction, perhaps you should consider diversifying out of it, particularly the coin collection (you may not have much choice about the leave).

Regarding the leave balance, how likely are you to quit your present employer in the next 1-2 years? Take into account what would happen if your employer policy changes such that you are no longer eligible to encash the leave (or there are constraints imposed that make it less practical or valuable). What would happen if employer were to run into financial difficulty? If at all you include that in your networh, discount it considerably to account for the lack of liquidity and uncertainty.

If there is an active market for the coins, use the current liquidation value in your networth calculation. Account for all transaction costs associated with liquidating them.

rated:
Mark to market is what I do for these kinds of things. I update monthly, quarterly, or yearly depending on the asset. However, coins are easier to liquidate than a home (IMO) with far less transaction cost, so I typically don't include equity in my properties in my net worth calculation. That's the only thing I'm super conservative on just because it's difficult to estimate transaction costs and net proceeds from a sale of a property.

rated:
There's no benefit to having net worth calculation other than your own personal tracker. So really, you can do it any way you think is best.

Personally, I go conservative on net worth calculations. Unless there's a very active market (ie stock market), I don't mark to market anything. If anything is to be expected in the future, I just wait until the future to add to net worth. For instance, the sale of an investment. This way, if I achieve my goal, I know that I actually have more than that.

rated:
Thanks to all for this discussion. I have found some useful information here which is very helpful for me.

rated:
I have found some useful information which is very helpful for me. Thanks to all...!!

rated:
This is all on paper, so do what you want.

rated:
imbatman said:   This is all on paper, so do what you want.
  Hence, "mark to market." Isn't that the very definition--to see what your various positions are "worth" relative to the market?

rated:
Chill99 said:   There's no benefit to having net worth calculation other than your own personal tracker. So really, you can do it any way you think is best.

Personally, I go conservative on net worth calculations. Unless there's a very active market (ie stock market), I don't mark to market anything. If anything is to be expected in the future, I just wait until the future to add to net worth. For instance, the sale of an investment. This way, if I achieve my goal, I know that I actually have more than that.
 

  When you start engaging in more complex lending activities your net worth becomes very important.  I'm talking about private bank loans, collateral based loans, and the other business opportunities that come from having healthy liquidity.  So if you have aspirations for pursuing these activities you need to take your net worth very seriously and start tracking it now.  You should be very realistic.  For example, the fair value of your home should include realtor commissions, costs to sell, costs to prep house for maximum transaction price, etc.  401ks and IRAs should assume distributions without penalty.  Raw land should be valued very conservatively.  Make that very very conservatively.  You could be living in the homeless shelter with $10 MM worth of raw land while the buyer cuts through the red tape.  I never assume my pension is worth X dollars per month when I turn X age.  I always take the immediate cashout value.  Unvested benefits should be excluded.  Basically you want to be able to methodically get yourself down to cash.  And speaking of cash you should always report vault cash as well.  Keep it under the mattress if you want but make sure you have it at the ready.

As far as precious metals, stamps, classic cars, beanie babies, bitcoin, eBay inventory, and comic books, you need to make sure these are part of your net worth but they don't define you financially.  Never allow these items to highlight a statement of net worth.  I only mark metals and coins to metal value even if they trade at a premium.  I never add the spread.  Bitcoin can make you very rich but is really not that fungible despite the illusion of the blockchain.  I tried to move some bitcoin out of point X and it took 48 hours because the blockchain was running behind.  That was a shock.

Sometimes I wrap all of these items into "junk" assets and track one number.  When the underwriter asks about the junk number I just call it my miscellaneous valuables. 

rated:
jamesboy, why would you not account for 401k and IRA penalties but you would account for cash value of a pension? If the goal is to get to cash, as you say, why would you not consider a 10% penalty, on top of income taxes, for a 401k and/or IRA?

rated:
WalletFatKing said:   1. At my place of employment, I have accrued time (benefit) that's worth about $45k. It's earned time that was accumulated in the past. They hold 100% cash value and can be cashed when leaving the employer at the final pay rate. 
 

  I have no idea if this is a common practice but seems pretty dangerous and a bit foolish. What happens if the company goes bankrupt? Is that money in an insured company account? Besides the fact it's not earning interest. Hope you don't work for Sears.

rated:
atikovi said:   
WalletFatKing said:   1. At my place of employment, I have accrued time (benefit) that's worth about $45k. It's earned time that was accumulated in the past. They hold 100% cash value and can be cashed when leaving the employer at the final pay rate. 
  I have no idea if this is a common practice but seems pretty dangerous and a bit foolish. What happens if the company goes bankrupt? Is that money in an insured company account? Besides the fact it's not earning interest. Hope you don't work for Sears

It just means he hasn't taken a vacation in a while.  A lot of employers will pay you for unused vacation time if you separate.  You can't otherwise cash it out other than by taking the vacation.  

rated:
But if the company goes under?

rated:
VESTED employment benefits should be counted, based on what you would get for them if you quit today. (I would not count unvested or pensions assuming you'll be there another X years.)

Precious metals are certainly fair to count their bullion value, you could take those to a coin dealer today and get about spot price for them (maybe -1% or -2%, heck you could smelt them for 97% spot or something). For numismatics, it is more murky. There are many things (hence why people mention Beanie Babies, etc.) where the "market" price in some guidebook doesn't accurately reflect the actual cash money you can realistically get for them if you don't own a retail store (I remember a rude awakening where dealers offered me 10% of the "value" of my baseball cards according to some book.) So I would do my best to either just use bullion value, or use a VERY realistic & conservative "liquidate today" value -- not what you could get if you get lucky with a bidding war on eBay, or what coin dealers sell them for. It helps if you have actual experience selling some of these items, otherwise most people are overly optimistic. But if you have a graded coin that you have received multiple offers from dealers of $5,000 or actually sold similar coins, I do think it's fair to count a conservative estimate of the value you could really get for them.

rated:
atikovi said:   
WalletFatKing said:   1. At my place of employment, I have accrued time (benefit) that's worth about $45k. It's earned time that was accumulated in the past. They hold 100% cash value and can be cashed when leaving the employer at the final pay rate. 
  I have no idea if this is a common practice but seems pretty dangerous and a bit foolish. What happens if the company goes bankrupt? Is that money in an insured company account? Besides the fact it's not earning interest. Hope you don't work for Sears

  No interest but it's generally based on your wages so.... If your wages are increasing at inflation or better (but less than opportunity cost / long term market returns) it's mostly a wash.
although, OP says it's cash value which sounds worse.  But then op contradicts itself and says final pay rate.

rated:
atikovi said:   But if the company goes under?
The same thing that happens to unused paid time off any time a company goes under - you lose it.

rated:
For #1, you should talk to your HR and Accounting departments. One of my employers had a similar no-cash-out policy, but if asked, Accounting would be very happy to zero out your vacation for cash. That's because the vacation you're carrying is a liability that they would prefer to be as small as possible.

atikovi said:   But if the company goes under?
 

Then just like everything else virtual (stocks, bonds, notes, contracts) about the company, its up to the bankruptcy judge. YMMV. Vacation time doesn't have the same kinds of protection on a legal basis like 401(K) does.

rated:
This is why balance sheets have different categories for current and long-term assets vs. liabilities. You count everything, but only rely on the more liquid section to be as good as cash.

rated:
dcwilbur said:   
atikovi said:   
WalletFatKing said:   1. At my place of employment, I have accrued time (benefit) that's worth about $45k. It's earned time that was accumulated in the past. They hold 100% cash value and can be cashed when leaving the employer at the final pay rate. 
  I have no idea if this is a common practice but seems pretty dangerous and a bit foolish. What happens if the company goes bankrupt? Is that money in an insured company account? Besides the fact it's not earning interest. Hope you don't work for Sears

It just means he hasn't taken a vacation in a while.  A lot of employers will pay you for unused vacation time if you separate.  You can't otherwise cash it out other than by taking the vacation.  

  I think that is a very generalized comment. My wife had a cash balance pension and she left her job last year to become a stay at home mom, and a month after she left, we got a letter saying they owed her $9700. That had absolutely nothing to do with her vacation time, of which she was paid out her earned balance when she left. Also, she didn't contribute a nickle to the pension fund--it was purely company-paid.

rated:
jaytrader said:   
dcwilbur said:   
atikovi said:   
WalletFatKing said:   1. At my place of employment, I have accrued time (benefit) that's worth about $45k. It's earned time that was accumulated in the past. They hold 100% cash value and can be cashed when leaving the employer at the final pay rate. 
  I have no idea if this is a common practice but seems pretty dangerous and a bit foolish. What happens if the company goes bankrupt? Is that money in an insured company account? Besides the fact it's not earning interest. Hope you don't work for Sears

It just means he hasn't taken a vacation in a while.  A lot of employers will pay you for unused vacation time if you separate.  You can't otherwise cash it out other than by taking the vacation.  

  I think that is a very generalized comment. My wife had a cash balance pension and she left her job last year to become a stay at home mom, and a month after she left, we got a letter saying they owed her $9700. That had absolutely nothing to do with her vacation time, of which she was paid out her earned balance when she left. Also, she didn't contribute a nickle to the pension fund--it was purely company-paid.

The OP specifically stated that the $45k was for "accrued time."  

rated:
jamesboy said:   
Chill99 said:   There's no benefit to having net worth calculation other than your own personal tracker. So really, you can do it any way you think is best.

Personally, I go conservative on net worth calculations. Unless there's a very active market (ie stock market), I don't mark to market anything. If anything is to be expected in the future, I just wait until the future to add to net worth. For instance, the sale of an investment. This way, if I achieve my goal, I know that I actually have more than that.

  When you start engaging in more complex lending activities your net worth becomes very important.  I'm talking about private bank loans, collateral based loans, and the other business opportunities that come from having healthy liquidity.  So if you have aspirations for pursuing these activities you need to take your net worth very seriously and start tracking it now.  You should be very realistic.  For example, the fair value of your home should include realtor commissions, costs to sell, costs to prep house for maximum transaction price, etc.  401ks and IRAs should assume distributions without penalty.  Raw land should be valued very conservatively.  Make that very very conservatively.  You could be living in the homeless shelter with $10 MM worth of raw land while the buyer cuts through the red tape.  I never assume my pension is worth X dollars per month when I turn X age.  I always take the immediate cashout value.  Unvested benefits should be excluded.  Basically you want to be able to methodically get yourself down to cash.  And speaking of cash you should always report vault cash as well.  Keep it under the mattress if you want but make sure you have it at the ready.

As far as precious metals, stamps, classic cars, beanie babies, bitcoin, eBay inventory, and comic books, you need to make sure these are part of your net worth but they don't define you financially.  Never allow these items to highlight a statement of net worth.  I only mark metals and coins to metal value even if they trade at a premium.  I never add the spread.  Bitcoin can make you very rich but is really not that fungible despite the illusion of the blockchain.  I tried to move some bitcoin out of point X and it took 48 hours because the blockchain was running behind.  That was a shock.

Sometimes I wrap all of these items into "junk" assets and track one number.  When the underwriter asks about the junk number I just call it my miscellaneous valuables. 

  Ok, yes that's true.  However, a lender would never take your calculation of net worth.  If you are dealing with lenders constantly, then yes it's important to have a net worth that reflects what a lender would want to see.  For the most part, every time (4x in the past 4 years), that I needed to apply for a loan, I just list my assets and what I think the approximate value is (mark to market) and let the underwriter figure out if it's worth that.  

rated:
Does anyone include deferred taxes on pre-tax retirement accounts in their liability balance?

rated:
I wouldn't include the numismatics in the net worth calculation. I have a collection of coins worth over $125K. You can get a rough idea of what they're worth by following auctions at Heritage Auctions for example and seeing what similarly condition coins are selling for. I actively keep an eye out on auctions for coins similar to mine and know what the last few sold at. There are very few examples of the coins that I collect that come around.

However, at some point if you wish to sell, it will take several months to put together a consignment and you will want your best coins to be featured in catalogs. In addition, though the coins will most likely sell for more than what they would now there is a chance that the market will have faltered. If that were the case I would hold even longer so they're not a reliable part of the Net Worth calculation since you don't know when the best time to sell will be and it may take longer than expected.

Personally, I don't see myself ever selling unless I were upgrading the coin to one in better condition. I will pass them on to my daughter with strict instructions on how to sell for the best value if that's what she decides to do with them. My hope is that she will pass them on to her offspring if she has any. That said, I leave them off my Net Worth calculations.

rated:
DerekZoolander said:   Does anyone include deferred taxes on pre-tax retirement accounts in their liability balance?
  For most folks who are several years away from retirement, it would be impractical to estimate the tax liability.

A better way is to separately track the tax-deferred balance and tax-free balance (Roth). Some may have a third category if for example they made a non-deductible traditional IRA contribution. This can then be used to get an estimate of what monthly after tax spending income one can derive from the retirement assets.

rated:
The amount grows at the rate of my pay. If I get a raise, this amount also goes up.


dcwilbur said:   atikovi said:   But if the company goes under?
The same thing that happens to unused paid time off any time a company goes under - you lose it.


Well, I can say it will take something terribble in the world for this to happen, and still the 45k accural balance will be the last thing they touch.

rated:
jaytrader said:   jamesboy, why would you not account for 401k and IRA penalties but you would account for cash value of a pension? If the goal is to get to cash, as you say, why would you not consider a 10% penalty, on top of income taxes, for a 401k and/or IRA?
 

  The ERISA protections for 401Ks and the legislative fixes for IRAs generally make them judgment proof.  Depending on your state the same could be said for 529 plans.  Pensions have many more formulaic dependencies and should be evaluated based on your own situation.  Deferred comp generally gets more complicated as you move into higher income brackets.

rated:
Chill99 said:   There's no benefit to having net worth calculation other than your own personal tracker. So really, you can do it any way you think is best.
  I calculate mine based on what my estate would be worth if I dropped dead in the next five minutes.  This is probably one of the few calculation methods that has any real legal relevance (for estate tax purposes).
DerekZoolander said:   Does anyone include deferred taxes on pre-tax retirement accounts in their liability balance?
I have two values on the bottom line of my spreadsheet.  The first is my actual net worth.  The other is what I'd have left tomorrow if I distributed all the tax-deferred assets to myself today and paid 39% total taxes on those distributions.  Obviously the second number is an extremely rough approximation, but it's just a way of getting a ballpark idea of what I'd be carrying if I put all my assets into cash and carried that cash around in a duffel bag.

rated:
WalletFatKing said:   Well, I can say it will take something terribble in the world for this to happen, and still the 45k accural balance will be the last thing they touch.

Your employer going belly up is probably unlikely. I would be much more worried about losing my accrued vacation because the company changed the policy about paying it out in full or changed the policy so you couldn't get it if you were fired and then they fired you. Policies on vacation time are not set it stone. You know your employer and you know better than anyone whether you think they will change their policies any time soon.

My wife lost about a month's worth of accrued pay when her employer changed their sick time policy. Then she left. Now she works for them again part time and hourly (so no benefits). To make things feel even worse, she got an email a couple months ago that they changed their policy AGAIN to the point where if she had the exact same situation now she had before she left, she probably wouldn't have lost all her time.
  

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