Calculating my wealth

[OxygeN]

So I started to give it a try in calculating my wealth, following advices found here:

How To Calculate Your Net Worth Easily - The Poor Swiss

Find out how to calculate your net worth and how to keep track of it over time. Also find out why it is interesting to keep track of it.

thepoorswiss.com

I decided to try this in GnuCash and there I can set the "opening balance" (I'm working on 2024). This is quite easy for my checking and savings accounts (I just take the value on 31.12.2023), but it gets slightly more difficult for me when it comes to the money I'm investing in the market and my 2nd and 3rd pillars.

• Investments - I would just enter the amount I've put in the market since I started investing, is this correct?
• 2nd pillar - how can I get the value of my contributions in the past? Is the only way looking at all my salaries from the past and sum the contributions?
• 3rd pillar - as I used my 3rd pillar in 2018 when I bought my apartment and every year I paid the full amount into 3rd pillar, I could just sum these, right?

The capital increase of the two pillars, due to interest rates, should not be added to the assets because it's actually an income, right?

TIA.

 

[Max]

This is quite easy for my checking and savings accounts (I just take the value on 31.12.2023), but it gets slightly more difficult for me when it comes to the money I'm investing in the market and my 2nd and 3rd pillars.

It shouldn't get more difficult. You just take the values on the reference date (you seem to use 31.12.23).

Net Worth = Assets – Liabilities

Capital gains and dividends are no liabilities.

 

[OxygeN]

Thanks for stopping by, @Max
Are you therefore saying that for all the three items I've listed, I can just take their value at 31.12.23) and that's correct?
I was under the impression that I should put as "Opening Balance" for my investments the factual amount of CHF I've invested - let's assume 100k in the last 6 years. Then let's assume that if I'd be selling everything now, I'd get CHF 110k - the +10k I would account for as "capital gain". Ah, but let me think out loud: I'm thinking at the investments I (still) have at UBS. They show now 110k in my summary, therefore I have to assume that the +10k is in fact realised gain (unlike with VT on IBKR, where my asset is the amount of money I invested 50k and the unrealised gain equals 3k - so I do only own 50k).

Please correct me where/if I'm wrong - thanks!

 

[Max]

If you are calculating your net worth, you should take all the values as of 31.12.23 (if you would like to use it as the reference date) and subtract your liabilities (if you have any).

If you are calculating your investment profit, then you should separate gains and dividends from your principal. But this is a different calculation.

 

[Baptiste Wicht]

• Investments - I would just enter the amount I've put in the market since I started investing, is this correct?
• 2nd pillar - how can I get the value of my contributions in the past? Is the only way looking at all my salaries from the past and sum the contributions?
• 3rd pillar - as I used my 3rd pillar in 2018 when I bought my apartment and every year I paid the full amount into 3rd pillar, I could just sum these, right?

That does not seem right to me.

What you put in your investments does not matter, what matters is what you have now, same for 2nd and 3rd pillar. What you should do is get the actual value of these 3 assets either at the end of each month or at the end of each year and use that as the correct value.

 

[OxygeN]

Thank you both @Max and @Baptiste Wicht - got it now. For the assets which are changing (like the mentioned "investments", 2nd and 3rd pillars) a periodic update could help in showing more precisely where my wealth is. Would it be wrong to leave this number in the "opening balance" and just update the amount and the date?

 

[OxygeN]

Oh, and sorry that I'm mixing/derailing the topic title with GnuCash I actually want to use this software to do my personal accounting, but in fact it will show my wealth as well.

 

[Baptiste Wicht]

Would it be wrong to leave this number in the "opening balance" and just update the amount and the date?

I don't think so. But if you only keep track of the opening balance, you will not be able to see your net worth over time. This may be fine based on your needs. But having an idea of net worth growth is important for many.

 

[OxygeN]

I don't think so. But if you only keep track of the opening balance, you will not be able to see your net worth over time. This may be fine based on your needs. But having an idea of net worth growth is important for many.

Sure, I want in fact to use GnuCash to have an idea of my net worth as actual as possible. Thinking out loud:
It's easy to use "opening balance" for a traditional checking or savings account: I put the initial value and the, thanks to the double-entry accounting method, it will always reflect the real value (I take money from the checking account and use it to pay for dinner, then in GnuCash 2 transactions will be proof of it).
Using "opening balance" with investments is a bit more tricky, because there's no manual transaction which changes their value. It's the market going up/down. Do you think, just from the logical perspective, that following could work/make sense?

1. in GnuCash I add an account under "Income" called "IBKR";
2. every month I check the amount of money I have on IBKR;
3. the difference between the value I get in step 2 and the "opening balance" I put it in the account created in step 1 - which will be linked to the "Investments" account. E.g. I have "opening balance" of 50000. One month later I have 51000 so the difference is 1000. I put +1000 into the "IBKR" and I have the actual wealth status. Two months later I'm down to 49000 so the difference is 2000. This time I have to register -2000 in the "IBKR" account. Does this sound correct from an accounting perspective?

 

[Baptiste Wicht]

It sounds correct since that will report monthly unrealized gains. It also does sound a little tedious, but I don't know enough about Gnucash to know if you can do better.

 

[OxygeN]

It sounds correct since that will report monthly unrealized gains. It also does sound a little tedious, but I don't know enough about Gnucash to know if you can do better.

Thanks. I'll ask on the GnuCash mailing list if there's some better way to do it, but in the end I don't really care: checking once a month my portfolio on IBKR ain't much time-consuming and I was doing something similar until a couple of weeks ago (checking the status of my bank accounts to graph them). And, finally: as I will be entering my expenses and income in GnuCash on a daily basis (or almost daily), it's fine with me.

 

[OxygeN]

... and of course I got another question
I do have a collection of vintage music instruments which I bought both in EUR and in CHF - and I sometimes do sell parts of the collection in EUR or CHF. I'd say this collection is an asset, right?
Regarding EUR/CHF: I already have a spreadsheet where I enter the price I paid and the currency, then I convert it in the other currency and enter that value as well. I do this, because I can't foresee if I will sell this item, which I bought in CHF, in EUR or CHF. Now here's the question: is it correct to set up 2 accounts "Collection CHF" and "Collection EUR" and then only enter the CHF value if I bought the item in CHF, viceversa if I bought it in EUR? I'm thinking about how to register the sale transaction if I sell the item in the other currency (not the one I bought it). If I buy it in EUR and sell it in CHF, I would have a discrepancy in my accounting:

1. bought for 1000 EUR --> asset "Collection EUR" increased by 1000;
2. sold for 1200 CHF --> how to correctly reduce the "Collection EUR" asset?

I hope I was clear enough - otherwise just ask!

TIA

 

[Baptiste Wicht]

That's a good question. But unless you buy them to hold value and then sell them, I would not even consider them. The price can vary a lot and you may not be getting what you think for these assets. Sure, they have value, but only if you sell. If you can't foresee you will sell, ignore it until you sell. Unless your goal is to have everything on your net worth tracker (or if you want a collection tracker). But then, you can always go farther. Should you put your computer and phone on the list? That's why it's better to stop at liquid assets and assets you have bought for the sole purpose of holding value.

 

[OxygeN]

Thanks for your insight. I understand your way of thought and I didn't consider it like this (I didn't know this perspective). Therefore, I got other considerations:
Regarding "your computer and phone": indeed those are in fact "assets", because it's something I would own. Given the fact that everything I buy which is not a consumable (e.g. groceries) becomes an asset of mine, I would also have to go down into detailing that I bought a pan, two brushes, 5 pencils, and so on. This would be "crazy" at least (or a bad case of OCD) So on this, I would skip. If I buy a laptop, I just take the money from my "CHF bank account" and put it into the GnuCash account "Electronic devices" (as an example). Which would actually represent a transaction from my assets (money on my bank account) into the category "Expenses".
For the collection, it might be a bit different (but YMMV): I'm not a pure collector. I do play those instruments and sometimes I decide to sell one because it didn't receive enough attention (play time). Adding the fact that I'm paying an insurance on the whole value of my music studio, even though this doesn't have a direct influence on how to treat my collection "wealth-wise", it makes me feel and think that if I'm covering some 10k of worth with an insurance, then it's a bit more than just an expense.

I'll think about it - if it will make sense to me adding it as an asset or not. Thanks for your "food for thoughts"