Net Worth vs. Debt Worth (updated 4/11/19)

I was writing a blog post the other day and as I was writing about my debt, the idea of a “debt worth” came to me. Now I imagine somewhere in the blogoshere and the internet somebody has coined and copyrighted that phrase, but it was the first time it occurred to me. And it got me thinking, what is my net worth compared to my debt worth.

Let’s start with a simple definition.

To me, a net worth is everything you have, all your assets: house, car, bank accounts, jewelry, cash on hand, etc.

Debt worth is everything you owe, and some of those things could be repeats: house, car, credit card debt, solar loans, 401K loans, personal loans, etc., any money that you owe anybody else.

Sometimes in our society, I think people confuse net worth and debt worth with their personal worth. People who have a huge net worth are not better people than people who have a lot of debt. Financial wealth does not equate to “good people”.

Lately, I have been comparing my worth, net worth and my debt worth.

Worth:

4 cars                             $20,000

1 house                        $591,000

1 401K                          $210,000         

1 403B                            $60,000

Bank accounts                $12,000

                                    ________

                                    $893,000

On the surface, it looks like we have a very healthy financial worth, but I only showed you one side of the picture. This only takes into account our assets, and assets are only half of what determines a net worth.

Now let’s take a look at the other side and see a more accurate picture.

Debt worth:

1 car loan                         $3700

1 house loan                 $455,000

1 401K loan                      $8500

1 Solar loan                    $26,000

Credit Card debt              $16,600

                                    ________

                                    $509,800

We have a lot of liabilities so our “worth” isn’t nearly as good as it looks.

Taking away our liabilities, or our debt worth, brings our total net worth down to around $383,200

These are all new, updated numbers for this post. Periodically, I think it’s important to look back at where we were just so we can see how far we’ve come. And we have come far.

Our net worth has increased by over $33,000 since I originally posted this in February of this year. That means we are going in the right direction. A lot of this is market fluctuations: especially for our retirement accounts, but some of it is progress. We are making progress. We are going to decrease our “debt worth” and continue to increase our net worth.

Debt worth is a bigger story than just numbers. Debt, and finances in general, bring so much emotion to the table that it becomes difficult to determine our true “debt worth”.

Debt makes me feel inadequate, ashamed, irresponsible. These feelings factor into my debt worth just as much as the actual numbers do.

Having debt doesn’t make you a bad person, but it often makes you feel like one.

Taking control of our finances and making progress towards our debt makes me feel like I’m getting it right. Making a plan for my money, and sticking to it, makes me feel like I am on the right track and makes the weight of my debt worth more manageable.

I am one of the lucky ones, even taking into account the huge amount of debt that we have, we have a positive net worth, that’s mostly in part to our retirement accounts. Our retirement accounts are nowhere near where we wish they were. In fact, we changed our contributions to help us get out of debt. I can’t wait until we are credit card debt free and can max out our contributions to our 401K again. Then we will really see our net worth grow!

Remember, you are not your debt, even if feels that way sometimes. Your debt worth does not determine your worth as a person, child, parent, friend. You are more than your debt.