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Little John



Joined: 08 Mar 2008
Posts: 6879
Location: UK

PostPosted: Mon Mar 18, 2019 7:08 pm    Post subject: Reply with quote

To calculate your nett worth, you should also deduct all of the water rates and council tax you are going to have to pay wherever you live for the rest of your life
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vtsnowedin



Joined: 07 Jan 2011
Posts: 5241
Location: New England ,Chelsea Vermont

PostPosted: Mon Mar 18, 2019 7:42 pm    Post subject: Reply with quote

Little John wrote:
To calculate your nett worth, you should also deduct all of the water rates and council tax you are going to have to pay wherever you live for the rest of your life
Not unless you are forced to live off your assets without any continuing income. And if you do that you would also have to include all other routine expenses like food ,rent and clothing etc. The net worthy (only one T ) is a snapshot of how you stand on any given day. How and when you dispose of it is an entirely different question.
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Little John



Joined: 08 Mar 2008
Posts: 6879
Location: UK

PostPosted: Mon Mar 18, 2019 8:34 pm    Post subject: Reply with quote

vtsnowedin wrote:
Little John wrote:
To calculate your nett worth, you should also deduct all of the water rates and council tax you are going to have to pay wherever you live for the rest of your life
Not unless you are forced to live off your assets without any continuing income. And if you do that you would also have to include all other routine expenses like food ,rent and clothing etc. The net worthy (only one T ) is a snapshot of how you stand on any given day. How and when you dispose of it is an entirely different question.
in the UK, your council tax and water rates liability exists independent of income or assets unless you have literally nothing and are entirely dependant on state social security benefits.

Furthermore, I would argue such "snapshots" are not very valuable as a measure of wealth. If they were, I could borrow a million pounds just prior to one of those snapshots and, in doing so, be able to declare myself a millionaire on a par with someone who has a million pounds in the bank that was not on the back of borrowing.

True wealth is a function of all assets and all liabilities, both present and future, so far as they can be predicted reliably, being taken into account.

Or, to put it another way, if we are to discount all future tax liabilities, why not also discount all other future liabilities including debt liabilities?
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vtsnowedin



Joined: 07 Jan 2011
Posts: 5241
Location: New England ,Chelsea Vermont

PostPosted: Mon Mar 18, 2019 11:25 pm    Post subject: Reply with quote

Little John wrote:
vtsnowedin wrote:
Little John wrote:
To calculate your nett worth, you should also deduct all of the water rates and council tax you are going to have to pay wherever you live for the rest of your life
Not unless you are forced to live off your assets without any continuing income. And if you do that you would also have to include all other routine expenses like food ,rent and clothing etc. The net worthy (only one T ) is a snapshot of how you stand on any given day. How and when you dispose of it is an entirely different question.
in the UK, your council tax and water rates liability exists independent of income or assets unless you have literally nothing and are entirely dependant on state social security benefits.

Furthermore, I would argue such "snapshots" are not very valuable as a measure of wealth. If they were, I could borrow a million pounds just prior to one of those snapshots and, in doing so, be able to declare myself a millionaire on a par with someone who has a million pounds in the bank that was not on the back of borrowing.

True wealth is a function of all assets and all liabilities, both present and future, so far as they can be predicted reliably, being taken into account.

Or, to put it another way, if we are to discount all future tax liabilities, why not also discount all other future liabilities including debt liabilities?

No you cannot increase your net worth by simply borrowing money. It would show on the books as an asset in your bank account but also as a debit (principle plus the interest due) so would decrease your net worth.
As to your council tax and water rates they are variable based on where you choose to live and at what level of comfort. Not everybody feels the need to demonstrate how well off they are by living in accommodations at the very upper end of their ability to pay.
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Little John



Joined: 08 Mar 2008
Posts: 6879
Location: UK

PostPosted: Mon Mar 18, 2019 11:29 pm    Post subject: Reply with quote

vtsnowedin wrote:
Little John wrote:
vtsnowedin wrote:
Little John wrote:
To calculate your nett worth, you should also deduct all of the water rates and council tax you are going to have to pay wherever you live for the rest of your life
Not unless you are forced to live off your assets without any continuing income. And if you do that you would also have to include all other routine expenses like food ,rent and clothing etc. The net worthy (only one T ) is a snapshot of how you stand on any given day. How and when you dispose of it is an entirely different question.
in the UK, your council tax and water rates liability exists independent of income or assets unless you have literally nothing and are entirely dependant on state social security benefits.

Furthermore, I would argue such "snapshots" are not very valuable as a measure of wealth. If they were, I could borrow a million pounds just prior to one of those snapshots and, in doing so, be able to declare myself a millionaire on a par with someone who has a million pounds in the bank that was not on the back of borrowing.

True wealth is a function of all assets and all liabilities, both present and future, so far as they can be predicted reliably, being taken into account.

Or, to put it another way, if we are to discount all future tax liabilities, why not also discount all other future liabilities including debt liabilities?

No you cannot increase your net worth by simply borrowing money. It would show on the books as an asset in your bank account but also as a debit (principle plus the interest due) so would decrease your net worth.
As to your council tax and water rates they are variable based on where you choose to live and at what level of comfort. Not everybody feels the need to demonstrate how well off they are by living in accommodations at the very upper end of their ability to pay.


Q: Why do debt repayments appear as a debit on your accounts?
A: because you have to pay them in the future.

Q: Why should taxes appear as a debit on your accounts?
A: because you have to pay them in the future.

Debt terms vary according to how much you choose to borrow and whom you choose to borrow from.
Taxes vary according to how much you choose to earn and where you choose to live.
Liabilities are liabilities.
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vtsnowedin



Joined: 07 Jan 2011
Posts: 5241
Location: New England ,Chelsea Vermont

PostPosted: Tue Mar 19, 2019 12:28 am    Post subject: Reply with quote

A: Debt repayments are a known quantity from the moment you sign on the dotted line and receive the money. The value of a house You own is what you could sell it for minus whatever you owe on the mortgage and unpaid current taxes. Future taxes might be yours or they could be the future owners hence you only worry or account for what you owe at present. If you have ever been through a real estate closing this should be clear to you.
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Little John



Joined: 08 Mar 2008
Posts: 6879
Location: UK

PostPosted: Tue Mar 19, 2019 7:53 am    Post subject: Reply with quote

vtsnowedin wrote:
A: Debt repayments are a known quantity from the moment you sign on the dotted line and receive the money. The value of a house You own is what you could sell it for minus whatever you owe on the mortgage and unpaid current taxes. Future taxes might be yours or they could be the future owners hence you only worry or account for what you owe at present. If you have ever been through a real estate closing this should be clear to you.
Debt repayments are not a known quantity from the moment you sign on the dotted line and receive the money. The value of a house you own may change in either direction prior to selling it as may the interest payments. Either in terms of changing interest rates or confidence levels in the market or in terms of the value of money at the time of selling or of paying the interest. Similarly, future taxes may vary in term of changing policy decisions over time or the value of money at the time of paying any of those taxes.

Liabilities are liabilities.
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vtsnowedin



Joined: 07 Jan 2011
Posts: 5241
Location: New England ,Chelsea Vermont

PostPosted: Wed Mar 20, 2019 3:53 pm    Post subject: Reply with quote

Little John wrote:
vtsnowedin wrote:
A: Debt repayments are a known quantity from the moment you sign on the dotted line and receive the money. The value of a house You own is what you could sell it for minus whatever you owe on the mortgage and unpaid current taxes. Future taxes might be yours or they could be the future owners hence you only worry or account for what you owe at present. If you have ever been through a real estate closing this should be clear to you.
Debt repayments are not a known quantity from the moment you sign on the dotted line and receive the money. The value of a house you own may change in either direction prior to selling it as may the interest payments. Either in terms of changing interest rates or confidence levels in the market or in terms of the value of money at the time of selling or of paying the interest. Similarly, future taxes may vary in term of changing policy decisions over time or the value of money at the time of paying any of those taxes.

Liabilities are liabilities.

Yes but net worth is a calculation of what you could liquidate everything for "today" with today's known conditions and current accounts receivable and accounts payable considered. If your car is worth $10,000 on the used market and you owe $5000 under the terms of the loan if you pay it off today it has a net worth of $5000. That you would pay say another $450 in interest if you kept the car to term is not included because if you sold it today you would avoid those fees. The same applies to future property (council) taxes on your house.
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