As featured in The Wall Street Journal, Money Magazine, and more!
     

Joe Biden’s Net Worth vs. Yours: Bad Comparison

This article was written by in Personal Finance. 11 comments.


Recently, J. Money from Budgets Are Sexy pointed out that you may have a higher net worth than Joe Biden, the Vice President. Biden’s net worth is about $215,000, lower than one might expect for a person in his position, and that’s due to his debt load. I could name a few financial oversharers who have listed a higher net worth, myself one.

Net worth measurements alone are notoriously bad for comparing financial well-being. Kiplinger does a great job of analyzing the Biden family portfolio and financial condition, offering suggestions for the Vice President and his wife.

  • Cash out unnecessary cash-value life insurance policies.
  • Simplify the overly diversified investment portfolio.
  • Reevaluate the number of loans.

Despite some of their financial shortcomings, the Bidens have little to worry about. While their net worth tells one story, there are other aspects of their lives that make up for any deficiencies in their balance sheets.

Income. When the time approaches for Joe Biden to retire from politics, the family will receive at least $90,000 a year from pension payments. With a Vice Presidential salary today and the possibility to command high fees for speaking and other appearances for the rest of their lives, Joe and Jill Biden have little concern about being able to make their debt obligations while building more wealth.

Human capital. Being a popular political leader a heartbeat away from the Presidency has its privileges. You don’t get to the second highest office in American government without making some friends along the way. If you could measure human capital, chances are good that Joe Biden would score significantly higher than you.

Human capital is important because it points to future opportunities. With a high score, if this were to be something that could be scored, you have a significantly lower chance of finding yourself in a detrimental financial situation. If your office could call any company in the world and request a meeting with the Chief Executive Officer — and get the meeting scheduled on your own time — there is very little in this world you could not achieve from a capitalist perspective. As the Vice President or former Vice President, getting a meeting with any charitable organization in the world would be as simple.

When I started out writing Consumerism Commentary in 2003, I was very focused on building net worth. Over the years of thinking about my financial situation, I’ve tried to take on a broader perspective. I began to look deeper into what it means to build wealth. For me, it was never about the number itself, or how that number changes from one month to the next, but about the journey of improving my financial condition. I knew there was more to wealth than balance sheet and income, but it took me a while to focus more on human capital.

Wealth is about creating opportunities to thrive in the future. Being careful about expenses and building income so that bottom line does increase each month is important, certainly, but there’s so much more. Being in government is not in my future, but setting myself up for the life I’d like to live is my primary concern today.

I liked sharing my monthly net worth and income reports. I liked that over time a community developed of other bloggers who were sharing this type of personal information, and that developers created tools like NetworthIQ that made online personal financial reporting much easier. The result of having all these data is the tendency to compare. Strangers would look at my balance sheet, and depending on the year, would wonder why the numbers were so low for someone my age working in a professional career, or would wonder why the numbers were so high for someone my age who spends most of his time writing online. I can take the criticism, but every once in a while, someone would get discouraged because they were comparing the numbers to his or her own life.

Similarly, and I’ve even written about this before, researchers have published studies which break down respondents into age groups and offer each group’s average net worth. This is another false comparison. You can’t just compare your net worth to some average based on age groups. There are many more variables that come into play. In some cases, a comparison might present some motivation, but that’s certainly not a universal response.

The number doesn’t tell the whole story, as we can see from an analysis of the Bidens’ finances. For someone with a net worth of $50,000 and no debt, on the surface it might seem like they might want to be more like Joe Biden and his net worth of about $215,000. His level of debt, however, is nothing to aspire to. The Bidens can presumably handle their debt with such a secure future, but that’s attributable to human capital, not financial capital.

Human capital may be hard to define, but in a nutshell, it’s your potential for future success. What would be the state of your wealth (or lack thereof) if you consider human capital in addition to your balance sheets?

Photo: Center for American Progress
Kiplinger

Updated June 20, 2014 and originally published October 1, 2012. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

Email Email Print Print
avatar
Points: ♦127,485
Rank: Platinum
About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 11 comments… read them below or add one }

avatar William @ Drop Dead Money

As for human capital, I’m a lottery winner. I married the best woman ever and on earth I can’t imagine a bigger blessing anybody could have. (Just celebrated our 40th)

In addition, we are blessed with an enormous extended family, and not a single drop of bad blood in there. How rare is that? We an go visit any one of tens of cousins, uncles and aunts, and always be welcome. On top of that we have more friends than we have calendar room for. At times that’s a a challenge, but overall another huge blessing. We’re blessed to have made our Drop Dead Money, and we can do what we like to do – just spent a weekend in the Colorado mountains where the aspens were at their peak.

I just started a new interest: blogging, and between the online conversations and the recent Fincon conference, the friendships just keep adding. I can’t claim credit for much of this – family is by and large a matter of luck – but I enjoy every minute of it! :)

You should run this post again in the middle of November! :)

Reply to this comment

avatar Financial Samurai

If one capitalizes the value of Joe Bidens pension, he is a multi millionaire and will blow most people out of the water!

Reply to this comment

avatar Luke Landes ♦127,485 (Platinum)

Perhaps ironically, if Biden retires this coming January, his pension would be worth more than if he waits, say, another four years. So it’s tough to place a real value on his future pension payments. Take away the pension, though, and he’s still got a pretty good chance of living life the way he’d like in his remaining years anyway. It’s this human capital that I’d like to be able to pin a number on.

Reply to this comment

avatar Jason @ WSL

I am with Sam on this one: if you mathematically determine how much you’d need to get paid $90,000/year ($2.25M based on 4% withdrawal rate) then that makes his net worth look a lot better. :) Human capital is an interesting thing to throw in the equation though as I’ve never really thought about that. He’s worth at least another $100k/year based on that.

Reply to this comment

avatar Jenna, Adaptu Community Manager

Hmm, I’d like to think my human capital would increase my net worth. I love getting to know people and connecting them with others who can help them in some way. Maybe there is a way to make a profit over those connections.

Reply to this comment

avatar Jacob

So, when are you going to create a human capital measure tool that we can use? ;)

I like this idea of creating human capital, but it is predicated on your future possible earnings, and is therefore not your current worth. I do agree it is not all about the numbers, and building human capital is something to aspire to, but building a large net worth calms my “security gland” (as Dave Ramsey calls it) far more than future earning potential.

But seriously, quantify human capital for us :)

Reply to this comment

avatar Lance @ Money Life and More

Since I’m young I’d say I have a lot of human capital left in me. I’ll be trying to increase my financial net worth though because I don’t want to rely on human capital that won’t always be there for me… unless I become some crazy sort of famous.

Reply to this comment

avatar Evan

Human Capital like good will for a business is a hard concept to grasp and even harder to value! I like the term building “mutually beneficial relationships” as a way to define my human capital

Reply to this comment

avatar Kathleen @ Frugal Portland

Human capital is a fun way to think about wealth — but hard to measure — it’s like measuring love. Can anyone really do that?

Reply to this comment

avatar Abigail

Let’s not forget that he doesn’t have to pay for housing — potentially for another four years — and, as Luke pointed out, he’s made connections. He’ll get speaking engagements (yes, even him) for as long as he wants them. Those are substantial income sources.

And let’s not forget that he’s 70. He has a pretty finite amount of time that he needs to draw on that net worth. Since most PF bloggers seem to be between 20-35, we need to have/work toward a higher net worth.

Reply to this comment

avatar qixx ♦1,890 (Half-Dollar)

Adding in Human Capital would increase my net worth. I’m still working my way out of the red. So even getting to Joe Biden’s net worth is a milestone still in front of me.

Reply to this comment

Leave a Comment

Connect with Facebook

Note: Use your name or a unique handle, not the name of a website or business. No deep links or business URLs are allowed. Spam, including promotional linking to a company website, will be deleted. By submitting your comment you are agreeing to these terms and conditions.

Notify me of followup comments via e-mail. You can also subscribe without commenting.

Previous post:

Next post: