Tuesday, October 31, 2006

Meme: The Value of Personal Possessions

After thumbing through a number of blog postings discussing the value of personal possessions, I found a few common themes:
  1. You own more than you believe you do
  2. People may inflate the value of personal possessions to offset the negative effects of debt on their networth

I prefer to take the exact opposite approach.

We have valued our personal possessions at $70,000. Afterall - there are four grown adults in our household and we tend to be the warehouse for all downsizing and deceased relatives.

However, when valuing our possessions, we don't seriously believe they are worth the list price. If anything, I estimate anywhere from 50% - 25% of list - assuming that approximates their liquidation value.

If we needed money, we wouldn't have time to hold out for the best price, search the internet or call to find the best buyer, etc....

Oddly, few of our possessions are actually very valuable per se, we just have so much stuff, it adds up. Over time, I would like to liquidate most of it - just to declutter. Many of the bigger things will probably be donated to charity - at least that way we'll get 40% of the value back.




Anonymous said...

I keep an account for our possessions that we purchase. Only big ticket items, no clothes or miscellaneous stuff.

I also make a yearly entry to depreciate them. I started this to track for insurance, just incase.

My account has a balance of $92k. My possessions are insured for $205k. I think it is a fair representation. I am positive it is well under our belongings.

I didn't account for it in the beginning and changed my mind. My thinking is these things are of value.

I think it is wiser to price them out at 10-25%. Garage Sale and Thrift Store Value is how I work.

makingourway said...

You raise a good point. Replacement value can be very different than cash value of personal possessions.
Our insurance company has a replacement value for our personal possessions that is indeed higher than the $70k liquidation value we use, but I don't even think about that number due to the calamity my family would suffer in order to receive the replacement.

enoughwealth@yahoo.com said...

I just ignore household possesions, cars etc. as they are hard to accurately value and some you would probably have to replace if sold, so can't really liquidate.

I also don't calculate and accrue unrealised tax liabilities on my investments (retirement account, investment accounts etc.) so it *might* all balance out anyhow.

In the end NW is just a number, so as long as you calculate it consistently it will serve it's purpose - help monitor if you are on track to achieve your goals, show if your portfolio is performing as well as planned.

ps. I'd be cautious about selling "clutter" - if you end up buying new "stuff" when you have some spare space, you'll end up worse off than if you just kept all the old stuff and didn't buy anything new. If find the amount of stuff I already have makes it easy to resist buying any new toys ;)