Wealth Measurement

I’ve been part of the NetworthIQ community for 2+ years now, diligently tracking progress and gauging when I’d be able to finally bow out of the work force.  Recently I’ve read more articles proposing that wealth should be measured by Net Investable Assets (NIA) as opposed to Net Worth (NW).  The difference between NW and NIA, is that NW includes primary residence as part of the wealth calculation; whereas, NIA excludes the primary residence when assessing wealth.  The argument is that the home serves more as a shelter and should not be considered as an investment.  Others go even further to suggest that true wealth should be based on Net Liquid Assets (NLA), which excludes retirement funds, since one can’t really touch the funds until after age 60/65.  At this junction, I would tend to agree that NIA is a better valuation.

Interestingly, I came across a NYT article yesterday chronicling the rapid rise and fall of the super-rich during the recent boom and bust cycle.  One of the ‘victims’ was John McAfee of McAfee anti-spyware.  I was astonished to read that the guy was worth $100 million at one point, but is now worth ‘only’ $4 million.  How does one lose 96% of his/her net worth in a matter of 2 years?  I could only chalk it up to extreme bad luck (triple whammy in stocks, Lehman bonds, and real estate).  I have no doubt he has the wherewithal to get back on top.  However, it is still a sobering tale…

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