Comments on: Personal Balance Sheet, May 2007 ($98,224, +8.65%)

By: Flexo

Flexo — Mon, 11 Jun 2007 04:18:56 +0000

Jack: I estimate the value of the car from edmunds.com's "private party" selling price... but I only update it a few times a year. When I do, I usually adjust the depreciation expense amounts over the previous months.

By: Jack

Jack — Mon, 11 Jun 2007 04:15:56 +0000

Nice job on the financial statements. I am curious about your auto entries in the Balance Sheet and the Income Statement. How do you calculate the value of your car as an asset year to year, and the amount of the depreciation entered as an expense? Where do the values come from?

By: J at IHB and HFF

J at IHB and HFF — Fri, 08 Jun 2007 04:14:48 +0000

Congratulations, Flexo. Ed has a point. Future home value and 401k value are also uncertain but those entries are not blank. Since net worth is a snapshot of liquidation now (thus excluding future interest), tax brackets and penalties for liquidating a 401k now are known. Thank you.

By: Virginia

Virginia — Wed, 06 Jun 2007 23:53:10 +0000

Good for you Flexo. Your income is probably too high now to deduct the interest on your student loan from your taxes, so you should probably consider paying it off with your savings. Oh, and maybe renting a cat-friendly apartment too? Just a thought.

By: Peter

Peter — Tue, 05 Jun 2007 02:27:49 +0000

The difference between the tax liability on the 401k balance and the car loan is that the tax liability is dependent on an unpredictable contingent event — withdrawing earnings. Only if earnings are withdrawn is tax due. On the otherhand, the car loan is due regardless of one’s actions.

By: Sun

Sun — Mon, 04 Jun 2007 15:25:27 +0000

Ed: I believe Flexo does include car loan as liability in his calculation.

I think including any future taxes on 401(k) right now doesn’t make too much sense. First of all you don’t exactly what your tax rate will be at the time you start to withdraw. Using an inaccurate number is not better than not using it at all. Second, taxes are paid at the time when you withdraw, not now. Therefore, it’s better to just subtract whatever you will have to pay at that time as expenses.

By: Flexo

Flexo — Mon, 04 Jun 2007 15:07:28 +0000

Ed: Good point. There’s a good case for including as a liability either the expected tax consequences in retirement or the tax consequences and penalties if the account were to be liquidated right now.

The tax consequences in retirement are too unpredictable — espcially trying to look forward 30 years. Any number included would be a best a wild guess. I don’t intend on liquidating the accounts, so that option doesn’t sound good for me either.

I’m not sure what value including the liability would add to the reports, but it is something I will definitely consider adding if I can come up with something that makes sense.

By: Ed

Ed — Mon, 04 Jun 2007 14:00:51 +0000

I am curious to know – If you list your 401k as an asset why do you not list the corresponding estimated tax liability? ou can expect to pay when you start to withdraw in retirement? Aren’t you artificially inflating your net worth (this is like putting you car value and not including your remaining loan amount in the liabilities)?