What % does your Ferrari make up of your Net Worth?

Value of your house in your net worth. For most people, by the time they get to their 40s, the major asset that they own is their house By that time, they've paid a substantial amount down on their house, maybe traded up a few times to get the house that they want, and they've put substantial equity into the home.

An example of property values increasing is a house that we bought in Tahoe in 94. Paid slightly under 200k, now worth 500k. An increase in value of 300k approximately in 10 years, not a bad rate of return. Generates no money, but if we wanted to sell it, we could get a fair amount of cash from the home.

Same deal with our residence: bought it in 78, now paid for. Has increased in value from the purchase price by 1000%. A substantial asset, although, we'll probably never see the cash from it, because its our home.

A good valuation in determinating what you're worth is the value of your assets (not including your home). I"ve heard that if you have 1 million in net assets, not counting your home, you fall in the top 1%. A net worth of 3M puts you in that same percentage (including your home).

Bottom line, if you spend more than 5% of your net worth on a depreciating asset, like a Ferrari, you better be getting a lot of satisfaction from the car. If that works for you, you've got a good deal.

Art

 

"If you can count your money, you don't have a billion dollars."--John Paul Getty

 

How much pain can you take, and how long can you take it....otherwise known as deferred gratification....

The more you invest now, the more you have later. Eventually money makes MONEY...

But, you can die tommorrow, so....Live for today, but plan like you will live forever.

Enough platitudes, eh?

My wife has this all figured out for me.....You start out with 40-50k (or whichever amount), and add 10 or so K each year. Buy whatever car falls within this range. Its easier to come up with the extra 10K a year and trade up, then have 100K all at once...

Ah, its important to have a good (sexy) wife....

 

Art, this is largely a west and east coast phenomenon. For long-time owners, their houses have appreciated so much that they have to count their equity as part of the pie.

When I moved to Sacramento in 1987, I sold my Texas house for $93K. Only problem was that I paid $125k for the house in 1983.

I brought a smaller house in Sacra-tomato for $150k. I sold it for $250k in 1990 when I moved back to Texas.

I brought twice the house in Texas for $170K in 1990. But, I'd be lucky to net $225k for it today. $45K appreciation in 14 years ain't much to write home about. Particulary considering that I put about $90k down in 1990. So my return on equity has been less than 4% a year.

Even worse from a financial perspective, I paid my mortgage off early.

But, unlike a lot of folks in California, I don't plan on moving, ever. This is why I don't count my home as part of my net worth. Every dirty dog needs a home, and I have mine.

Dr "Heading for the dog house" Tax

 

So does this mean I was stupid for paying cash for my house last year?

 

You Erik, stupid! Banish the thought!

 

I don't owe anything on any of the real property that we own. If we eliminate our real property, we're worth less than ---. Not a good deal. All large fortunes are usually made in real property. Examples: Rockerfellers, Kennedy, etc.

Art

 

Who the fock cares, buy the damn thing and drive it

 

Amen.

 

110%

 

So true. It depends on where you live.

My fiancee's a realtor at Coldwell and I do the rehab property thing on the side, so I have a pretty good clue what my place is worth. Case in point, the guy at the end of the block sold his house at 102% asking in 4 business days. All cash. My last house I paid $238k for in 01 and turned it over for $425k in March of 05. Not a bad tax-free profit for 4 years. I bought the place I'm currently in at (approx) $55 sq/ft below market because the owner was in a hurry and I was first at his door. I put 10% down on the place, paid off every bill I could find, and tucked the profit from the other house away. The equity in my place would cover a nice little used 360 coupe without touching a dime in savings, stocks I own or the cash from my previous home sale. I still also work and my fiancee is starting to outearn me, mind you. You gotta love Florida.

So yeah, I consider my home an asset. I can have a contract on the place in less than a month if the sky fell, so that makes it a better asset than a vehicle like a Ferrari which could takes months to sell (and probably at a loss). If you see anything wrong with this philosophy, correct me.

I'd really like to treat myself to an F355, but I'd feel totally guilty doing so. I would not fit this 5% rule - not right now. I don't think it would screw up my financial situation either, though.

RMX

 

THis is true however, in that field, if you don't SHOW money, you won't MAKE money. Its rare for an artist in the music/(u said Def Jam, hip hop) field to sell records if they are not showing "bling". Bling costs $$$$$$$.

So if they save money, they won't sell records. If they spend money, they'll sell records and be broke.
Its a vicious ciricle for them, sadly.

 

I personally don't think there's anything wrong with having zero net worth and owning a Ferrari, so long as you have the cashflow to afford one. If you're 23 and making $250,000+ a year, spend away! You can afford to wait a few years to worry about boring things like wealth preservation.

 

this whole thread is ridiculous ....

 

To answer the question, I am at about 2%, but I bought a less expensive model. However it is a good investment because it gives me about 25% of the fun in my life at this point.
BT

 

Intersting thread!!

I think everyone will agree that acar is a depreciating asset. But the reason most of us are here is the we are not just car owners but car enthusiast. I have an uncle who was a top level exec at Ameritech in the mid-west and he used to regularly tell me how the 300ZX Turbo I had was a drepreciating asset and I could be investing the monthly payments into something else like a mutual fund or a money market. But what about the days I'm stresses at work, walked to the car, popeed the t-tops and let the run and my right foor relieve me of the daily stress. The interaction with the car was worth the pric of admission. I was in my early 20's at the time.

Fast forward to today, I own a piece of commercial property in DC that someone has made me n offer I cannot refuse. Hence, Future F430 owner is my board name. I have read on doing a 1031 exchange but I can tell you where $260K is going wthout hesitation.

I understand the logic behind trying to gain some understanding in how one determines when to buy an expensive sports car, but my gut is that most decisions to purchase were based on emotion. My 300ZX's and BMW's I have owned over the past 12 years were fueled by desire to drive a high performance sports car. As my financial situation has progressed, my penchant for sports cars has grown.

Most probably feel that the question delved too much into their personal finances, but personally whe I try to manage and play by the books. The sale of my building paints a much brighter financial picture for me a gain in the $2.5 million region to be exact. Would some call it irresponsible to spend $260K on a car, sure. Do I give a rats ass? No. I can't wait give this $260K away!!

JT

 

I'm actually quite shocked at how many people don't understand what net worth means. You can't just decide not to include your home. If your name is on the deed, its an asset to you. Regardless of how much money you have sunk into it, or wether you live in it or not.
The fact of the matter is, net worth is calculated by assets - liabilities. Very simple equasion.
I see a lot of people saying that its a liability because its not paid for, or because its not making any money. That doesnt make any sence. You are confusing your mortgage for the actual house. The mortgage and the costs associated with keeping that house are your liabilities that you have to weigh against your asset.

If I put down 10k on a house that I will buy for 100k, that leaves me with a 100k asset, minus a 90k liability. Net worth just for that is 10k. it will increase as you pay off your mortgage. You have to calculate both sides. its called double entry accounting.

Net worth is not how much money you have, its how much you have paid for, minus what you owe.

For the record i don't own a house or a ferrari, but i do have a minimal understanding of accounting.

 

The way I've heard it described is that excluding the primary residence is a variant equation called "investable net worth". The basic idea is just that for *most* people (aside from those few that do flip their primary residences) the primary residence is the last asset they would sell if they needed money. Hedge funds apparently look at investable net worth to qualify you as an investor.

 

I have never heard of that, but it makes sence. Either way though, the question asked was for net worth, not investable net worth.

Hedge funds are not in the general publics grasp. don't you need like $1mil+ in liquid assets, plus make a quarter mil a year to be considered? It would make perfect sense that for a hedge fund they would look at investable net worth.

 

Most Planners will tell you that you are correct in this statement. the only viable alternative value for most people th net investment in a house...is another house. So in true Net Worth terms the only value of a house is to the extent that you have more net value then you need for the lifestyle you want. For many 'Mericans this is not true as most believe that they do not have enough house for the life style they want as opposed to that which they NEED.

Complicated huh? But you are spot on!

 

Worse than that, Americans seem not to be saving anything on an aggregate basis, counting on the increase in the value of their house as a savings plan at the same time they rob the piggy bank with second mortgages and home equity loans to sustain a lifestyle they really can't afford. Combine that with the fact that most want a bigger house as you say and they're really in a hole.

 

And you are also correct but Net Worth is a Generally Accepted Accounting term and like many, its as meaningless as a wheelbase or a lap time in determining car performance. A factor yes, perhaps, but not the answer.

This thread started with the question of how much of owners Net Worth was invested in F cars. I think the author really meant - how much of your F-U assest were invested in F'cars? For some it might be 100% plus and for others whose garage pictures dot the landscape of FChat, its negligible. It takes all types.

Now the really interesting question is - how many F'car owners race more than 50% of their F-U Net Worth? Now those are the true fans - willing to commit not dabble. The rest of us are voyeurs living vicariously!

 

Do remember that teh sky did fall on 9/11/02 and there were many caught by the liquidity squeeze of trying to sell illiquid assets like a house ... just to survive.

but with that said, you could probably borrow from a Hank's Check Cashing Place (or the the like) which have great presence in FL I believe.

 

Too true - and when (and perhaps IF) the Chinese stop investing in our Treasuries, liquidity to sustain this lifestyle will dry up in a nano-second. We are all counting on this happening either very slowly or not at all so that we can sustain "This Wonderful Life"!

 

Hell, I'm liquid, I'd like to see that happen. Would make a lot of the things that I'd like to buy cheaper.

Art