Friday, May 25, 2007

My Net Worth: Can Be Revised?

In my net worth I include money on bank deposits and money invested in two mutual funds. As of April 2007 it equaled $2,280. But there’s also home equity that I don’t count.

Yes, technically I am a home owner. As I said, many people in the USSR and then in Russia were given apartments. My family got one in 1993 or 1994, I don’t remember exactly, in Hometown. By the way, our apartment has three bedrooms and is in very good location. I say, it was a very generous gift! We got it either from the government or my father’s employer, a large corporation. It wasn’t really ours, but we had a right to claim it as our property. We did it only in the summer of 2006 and I became an owner of one-third of the place – our family consists of three persons and each got an equal share.

So I decided to evaluate the value of my share of the apartment. It was relatively hard because I was well aware about real estate prices in Moscow, but I had no idea about this market in Hometown. Real estate in the capital is awfully pricey. A small one-bedroom apartment far from the center of the city costs way more than $100,000. I guessed that an apartment in Hometown was much cheaper than one in Moscow, probably about $10,000-$30,000.

However, when I searched on the Internet I figured out that a three-bedroom apartment with similar location in Hometown costs more than $60,000. Wow.

That makes me an owner of $20,000 in home equity and boosts my net worth up to $22,280+. However, I’m not going to include home value in my net worth:

1. I still don’t treat it as my apartment, or even my share of our apartment. This apartment is a gift from an enterprise or the government and my parents who included me in the list of owners. I don’t want to lay hands on it for a very, very long time. For me it’s a place where my parents live and don’t want to claim any part of it. In my life as an adult I intend to rent and then buy my own apartment.

2. Including it will make tracking the growth of my net worth very inconvenient. Compared to home value my cash and stocks look so meager. Their growth will be made invisible on a chart.

3. It is so hard to evaluate home value. Even $60,000 figure is rough. I also can’t track its price changes. So it makes home value some inexact constant figure that may be dropped for now.

So I’ll stay with my tiny $2,280.

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