Friday, December 11, 2015

Why I Will NEVER Share My Net Worth Online

There was an excellent post last Monday (November 30th) featured on Rockstar Finance by Mark titled Why 185 Bloggers Are Sharing Their Net Worth. Mark's article was well researched, informative, entertaining, and gave many reasons including honesty, progress, hope, motivation, accountability, inspiration, control, and freedom why people share their net worth online. I commend every one of the 185 bloggers who have the guts to update and post their net worth every month for all the world to see.

On the other hand, I will NEVER share my net worth online. Additionally, I can't think of a situation during which I'd share my net worth with anybody in real life. When asked to give my approximate net worth while applying for mortgages, credit cards, and opening brokerage accounts, I tend to give a nice round number that might have been applicable 10 years ago. There are multiple reasons why I choose to keep my net worth private, and I'll explain the main ones below. 

Fear

What’s so scary about posting one’s net worth online? The fear of family, friends, colleagues, acquaintances and strangers judging me based on an irrelevant number (see reason 3). Everybody who posts their net worth online runs the risk of having people associate them with a number. We’re all complex, multi-faceted people that should be defined by more than just a financial figure. Yet, reading that blogger X has a net worth of $XXX could lead others to form conclusions on the individual that have little to do with reality. 

I also fear repercussions if I post my net worth online. I’m perfectly happy working for my employer, and the thought of them knowing exactly how far down the road to financial independence I am scares me. Through my own experiences and observations, I’ve seen employees let go from different companies for a variety of justified and arbitrary reasons. If a company is trying to decide to let go off a high net worth employee or a low net worth employee with a similar skills set, my bet is that they’d let go the higher net worth employee.

Privacy

In an era when people willingly give up their privacy to make their online presence more engaging, I prefer to leave a little mystery. Although I understand that providing an increased level of disclosure about your financial position makes it easier for readers to identify with you, it’s simply not a trade-off that I’m willing to make. That said, I completely understand why a blogger who is dependent on their website as an important source of income would make this trade-off in an effort to better connect with their readers.

Upon reflection, I think privacy is closely related to my fear. Even a technological dinosaur like me realizes that finding out the identity of an “anonymous” blogger is not a huge challenge for someone who is motivated and has the necessary resources and abilities. Since blogging is only a hobby for me, I’ll continue to avoid a high level of financial disclosure on-line.

Irrelevancy of Net Worth

Out of the three reasons I choose not to share my net worth, this will likely be the most controversial: I feel net worth is an irrelevant figure when it comes to assessing financial independence. The personal circumstances of an individual, like their family, work, and hobbies are ignored. Net worth says nothing about the income and expenses of an individual, and how those might change over time. The figure also does not speak to the ability of an individual to generate income from the asset components of their net worth, nor does consider the rates of interest associated with the liability component. I’d argue that when assessing financial independence, the percentage of an individual’s regular yearly expenses that are covered by their yearly passive income stream is a much better indicator of progress. Add in the expected percentage growth in passive income compared to an expected future inflation rate relating to regular expenses, and I think you’d have a highly relevant metric to judge progress toward financial independence.

Additionally, consider for a moment how many assumptions need to be made when attempting to calculate the net worth of an individual. If the individual owns a house, they would need to assess the value of the home (something even real estate agents with comparable home sales struggle with), real estate commissions, land transfer taxes, moving expenses, mortgage penalties, future mortgage rates, etc..  Are you part of a company pension plan? Congratulations! Now if you want to calculate your net worth all you have to do is accurately forecast future salary increases, rates of return on the plan, the year of your retirement, and a reasonable discount rate. Are any of your income producing assets in tax favored accounts? An accurate net worth calculation requires you to predict future income tax rates, additions and withdrawals to the accounts, and rates of returns on those assets.

In summary, I’ll never post my net worth online as I fear providing an irrelevant figure could cause people to judge me and might cause negative consequences if my privacy was ever compromised. It’s worth re-iterating that I have a great deal of respect for the 185 bloggers who post their net worth monthly. If updating the figure online monthly helps them track their progress, hold themselves accountable, motivate and inspire others, all the better! It’s just not for me.


Do you or would you post your net worth online? 

10 comments:

  1. I post my own net worth as a percentage, normalizing it every month so that the previous month corresponds to 100%.

    It's mostly so my readers can keep track of things (I track my own net worth in actual dollars). As my absolute net worth grows, the monthly relative variation will decrease in magnitude, of course.

    But I do understand that it's just a number. It doesn't reflect eventual taxes on RRSPs, home expenses, future value of pension, etc.

    Basically, my net worth report is for entertainment only :P

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    1. You're the first blogger I've known to post their net worth as a percentage. Do you get much feedback regarding that monthly update? I can understand how the trend in that figure would be helpful...and entertaining.

      Thanks for adding a different perspective to this conversation!

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  2. This article resonated with me. While I enjoy reading net worth articles online - I choose never to share that number online myself - for the reasons listed by you.

    Great article. Thanks for sharing
    R2R

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    1. Like you, I enjoy reading net worth posts. I wonder if it's simply because they are the equivalent of financial voyeurism?

      I appreciate your feedback. Great minds think alike? ;)

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  3. DIH, I agree with you completely. Stealth Wealth is key to privacy. You don't want people to form an opinion in any way. Also, net worth is not too useful for DGI investing.
    D4s

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    1. "Stealth Wealth" is my new favourite financial term! Thanks for stopping by D4S.

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  4. Net worth is something good to know in case of really dire straits. If it's positive at least you know you're not going to lose everything. But like everything else it's just one piece of the personal finance puzzle. I think cash flow offers more insight because it let's you know where the cash comes from each month and where it goes. If you still have as surplus then great you're technically FI! Net worth misses out on that aspect and there's large variations between what people report. Some include house value some don't. Some include retirement accounts some don't. The list goes on and on so it's not even relevant when comparing one person's to another unless you find out exactly what they're reporting. I track it for my own purposes and I also share it on my blog although I have thought about discontinuing sharing it just in case someone I know happens to find and read my blog. As of now I'm not aware of anyone that does though.

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    1. Thanks for adding the perspective of someone who shares their net worth every month. Again, I give you huge props for having the courage to post an incredibly personal figure online. I also agree with you that cash flow is much more aligned to FI, but a positive net worth shows you're on the right track.

      Here's hoping your net worth keeps growing exponentially JC!

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  5. Hey DH. Good post. While I was reading I was like, geez whiz, but I do share my Net Worth! It tells you how long I thought about disclosing this particular data. While I think about it though I see this number as more or less a guidance for me : « am I doing better than, say last year? ». Yes, well keep going. In essence, Net Worth are hardly a tool you can compare yourself with other people. Like a lot of people mentioned, some take real estate, pension plan (or else) into consideration. I don't update this part of my blog that often. But I will leave it. Personally, I don't care if my neighbour is worth 1M$ or the other 100 K$. This is my Journey and mine only. Having said that, I totally understand why people wouldn't want to divulge these numbers, especially regarding work.

    Monsieur Dividende is my anonymity blanket. I am bolder with letting people know about my Financials numbers because of it. It gives me the freedom to feel less concerned about it. So why not play the game 100% If my cover is blown, I will live with the consequences. « Wo, this guys owns Johnson and Johnson and has blown it big time with Barrick Gold.» ! yeah, so what? ;-)

    Take care mon ami!

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    1. Bonjour Monsieur D! I agree that seeing the trend in net worth over time is useful for tracking progress. Like you mentioned, as long as it helps you focus on your journey, that's all that matters!

      I love the part about JNJ and Barrick. I truly appreciate how honest you are about your successes (which seem to be many in your portfolio) and your...less successful stocks. Part of blogging for me is to write about my many mistakes ( like Kinder) so that I'm not the only one learning from them. For what it's worth, Barrick looked very enticing to me a couple years ago.

      Merci pour ton commentaire! Bon soir mon ami!

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