Negative Net Worth…

Buried somewhere deep inside my life insurance application is an awful question…

‘What is your total net worth?’

I calculated my mortgage debt, subtracted my tiny home value, added my student loan debt and my auto loan debt, and then subtracted my liquid cash. The total? An astonishingly huge negative number representing my net worth.

Not wanting to stop at the large, large, large negative number, I added the amount in our retirement accounts (though technically locked up for the next 27 years under mounds of government and ESOP paperwork).

I landed at a number closer to zero but still negative none the less.

I received the following question from my insurer:

PLEASE EXPLAIN WHY YOUR TOTAL NET WORTH IS A NEGATIVE NUMBER.

Yes, they wrote it in all caps. As if I needed a reminder that I’ve made some pretty large financial snafus. Little do they know that if my number landed anywhere close to zero, they’d find me dancing excitedly like a lunatic on top of the bus I take every day.

I sent a long explanatory e-mail to the agent and figured she’d understand. Instead, I received a disdainful, ‘Fine. I’ll alert your Case Manager.’

Certainly I can’t be the only one with an insanely underwater mortgage that throws off my net worth right? Let’s do a poll. Is your net worth a positive or negative number?

And if you see 14 comments after I post this that say ‘positive’ and you’re about to say ‘positive’ as well, say ‘negative’ just to make me feel better.

Have mercy.

Posted by Beks on June 29, 2010 at 5:00 AM in Confessions, General Debt, General Personal Finance, Net Worth | 56 Comments »
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Bob responded:
Posted: June 29th, 2010 at 5:51 am
That doesn’t make sense at all. I’d wager most people with a mortgage have a negative net worth. The huge difference is that you have a plan and will be way ahead of the game very shortly. I’m curious as to why this is a question that was asked of you. Can your agent provide more detail?

Btw, I love that Dave Ramsey makes the distinction and people can call in and celebrate that they’re debt free when the only debt left is the house…
Jenn responded:
Posted: June 29th, 2010 at 5:53 am
Negative. Of course, I don’t have a house so that’s just all my debt, but still.
R.A. responded:
Posted: June 29th, 2010 at 6:00 am
Mine is negative also.

I also wonder why they asked for clarification on your negative net worth. I just applied for life insurance at the beginning of this year and they (USAA) didn’t seem to care!
E.D. responded:
Posted: June 29th, 2010 at 6:03 am
We have a positive net worth (~$400k) with a mortgage, but our house isn’t underwater.

About half of that number is the current value of our retirement savings.

Our only debt is the mortgage and we have no kids.
Susan responded:
Posted: June 29th, 2010 at 6:23 am
Positive – but it’s not as simple as comparing positive to negative. We bought a house when the market was low, got married young so we had 2 salaries paying off the house, worked for a Fortune 500 company that had a great retirement program + 401k, we refinanced a few times to get to a 10 year mortgage (2 years left) – it was just timing. We did manage to rack up about $50k in credit card debt that we’re working to get rid of, but our house isn’t underwater and we have a moderate amount put away for retirement.
Nichole@40daysof responded:
Posted: June 29th, 2010 at 6:45 am
I think positive, but it was negative for a really long time. I’m a little concerned about this life insurance policy. We are talking about term life, right? I don’t remember that as a question on our policies. Maybe Cali has some weird state laws that require that?
brooklynchick responded:
Posted: June 29th, 2010 at 6:49 am
Mine is ONLY positive if you put in retirement. Since I’m in my 30′s that seems to me like cheating!
Angie responded:
Posted: June 29th, 2010 at 7:12 am
Ours is negative 150k and we don’t even have a mortgage or house! So I’d say your doing just fine. Don’t be discouraged.
Natalie responded:
Posted: June 29th, 2010 at 7:16 am
Hugely negative – we sold out house at a loss during the recession and are still paying for it. Then we decided to put ourselves further in debt by sending my husband back to school. However, even though it’s a “one step forward, two steps back” approach, we hope to leap ahead when he graduates with better job market skills.
Stephanie responded:
Posted: June 29th, 2010 at 7:38 am
Our is negative. 3 university degrees later, it is going to be a while before it is positive. If we venture into buying a home we will be an additional 500,000 in debt and that is on a cheap condo. We are in our late 20′s so I guess it is to be expected. The good news is we both work for nonprofits and, after a few more years of nonprofit work, our federal student loans will be forgiven.
Cassandra responded:
Posted: June 29th, 2010 at 7:41 am
Mine is negative, and I don’t even have a mortgage.
Joe Dirt responded:
Posted: June 29th, 2010 at 8:08 am
Positive. But I was really negative about 15 years ago and worked hard to get here. Now I have to stay here.
Ann responded:
Posted: June 29th, 2010 at 8:37 am
Negative, our house was just appraised 30k under what we bought it at. It happens. We’re just plugging away one debt at a time.
Jane Zoe responded:
Posted: June 29th, 2010 at 8:46 am
Negative. And I don’t even know how negative currently.
Jen responded:
Posted: June 29th, 2010 at 8:48 am
Ouch! What an inconsiderate agent!! Good grief…

But, yes, you ARE supposed to include your retirement savings. Your net worth includes ALL of your assets, even if you can’t access them right away.

I suspect life insurance people are worried about people in severe financial straights committing suicide to get the insurance money. Or at least worry that possible fraud may happen if they see indicators of major financial stress. While it’s reasonable for them to be cautious, it’s really bad form to show their concern like that. Ick.

It might be useful for you to document your increasing net worth for when they follow up with you. That way you can show them that you are aggressively paying down your debt.

I also wonder if the insurance people are not in CA, or any other area that’s been hit with rapidly declining real estate values. I would think if they were familiar with the San Diego market they’d look at your mortgage, when you bought you house, and then nod their heads and say, “Oh, yeah, that makes sense they’re underwater. Everyone there is underwater or close to.” Still a warning flag for them to consider, but certainly shouldn’t warrant them treating you the way they did.
Debt-free Dan responded:
Posted: June 29th, 2010 at 8:52 am
Positive. Living like no on else .:-)
The Poker Meister responded:
Posted: June 29th, 2010 at 9:11 am
Negative. (Actually positive, but you should feel better at least seeing the negative.) No, I am not upside-down on my mortgage (though the appraisal is lower than our original purchase price), but we do have a positive net worth.
Knocking Out Debt responded:
Posted: June 29th, 2010 at 9:30 am
+$74,000 which is all due to retirement accounts.
I am upside-down on my mortgage by $1,200
Sarah responded:
Posted: June 29th, 2010 at 9:33 am
I had that question on my life insurance application also (I’m a resident of North Dakota). But I left it blank. Agent didn’t say squat to me about it. But still waiting for an approval or denial.
hithatsmybike responded:
Posted: June 29th, 2010 at 9:34 am
negative, but not by much.. and hopefully not for that long.

You can always surf the worst of http://www.networthiq.com
Some of those people are really screwed! (and some of them could support the whole lot of us and not even notice the expense!)
mary responded:
Posted: June 29th, 2010 at 10:52 am
negative by a lot, and i don’t have a mortgage.
lauren responded:
Posted: June 29th, 2010 at 10:57 am
Holy Smokes. I just realized we are positive. We sold our house in May and I hadn’t recalculated it yet.
Rini responded:
Posted: June 29th, 2010 at 11:05 am
Negative, and no mortgage. But we’re only half as negative as we were two years ago, so we’re making progress!
Karen responded:
Posted: June 29th, 2010 at 11:11 am
$386,000 positive. Only 7 years left on our mortgage so we are way above water there, our “kids” are 24, 22 and 21. More retirement saving to do!
Karen responded:
Posted: June 29th, 2010 at 11:12 am
Yep, mine is negative and I want to thank you for showing me how to do this computation—totally depressing in light of the mountain of debt. Ah well, there is a glimmer of hope that in 5 years we may see a rosier picture.
RB responded:
Posted: June 29th, 2010 at 11:32 am
If I count retirement accounts I have a positive net worth of comfortable size. I am in this position because I have made some positive choices in my life, beginning with “paying myself first” as a habit. We also have 25% equity in our home, even with values being low.

However, net worth alone is not an indicator of success. The poor choices I made have me in consumer debt slightly greater than 1/2 my annual salary. In the last two years we have “corrected” the bad choices but still living with the consequences. It is really difficult to get ahead when the single largest bill each month is covering the past. The good news is that our debt snowball is about to roll from 3 payments to 2, so we should really start to see the balances start to drop.
chacha responded:
Posted: June 29th, 2010 at 11:53 am
Well, it’s positive. It was falling drastically around end of 2008 but our house’s value has recovered. Well, recovered from like 350 to 430. We paid 530. Also, I don’t go by zillow’s value – I got by recent sales in my immediate neighborhood.

The ONLY reason I think that we have a nice positive net worth is that when we bought the house we’re in, we put down 65K (which was equity carried over from the last two houses bought before the height of the boom). Had we bought with little-to-no down payment, our net worth would have been negative through most of 2008/2009.
Tamara responded:
Posted: June 29th, 2010 at 11:57 am
It had been positive, but then I bought a condo last November & have procrastinated sitting down & figuring out how to add that to Quicken (it’s on my To Do List) to update the net worth figure. Off the top of my head I would guess I’m about even.
Dan responded:
Posted: June 29th, 2010 at 12:13 pm
Positive, with 2 mortgages (one on the primary, one on the rental), including retirement assets.

I’m with the other folks–it might make sense to ask someone about their net worth, but it sure is poor business sense to send any email in all caps to a customer.
JMK responded:
Posted: June 29th, 2010 at 1:24 pm
~$600k positive – half is equity in the house, half retirment and savings. Not including any “stuff” in that number (cars or household contents). Our cars are older (2000 and 2004) but we paid cash for them, never had school debts as we worked summers and during school, and got a little help from parents. I’m also not including the money set aside to help the kids with their educations in a couple of years. I view that money as already spent.

Odd, but I feel a little embarrased to post this. I hate seeing so many struggling with homes that have lost value, or digging out from under debts due to illness or other life events not under their control. I should feel good that we’re getting ourselves in good shape for retirment (in 10yrs hopefully). We live very frugally and most of the time we’re making weekly contributions to our retirment accounts, or extra payments on the mortgage. Occasionally we skip those payments for a bit and take a vacation, but then we’re right back on the saving bandwagon.

We weren’t always in good shape and with a clear plan of where we’re going and what it will take to get there. We did some stupid spending in our 20s and 30s and ran up our line of credit. It took several years to pay that down. That stupidity cost us at least a 5yr delay in our retirement. Yes we plan to retire in our mid/late 50s, but we could have done even better if we’d smartened up and been on track in our 20s like so many here. We weren’t thinking frugally back then at all, but just mindlessly spending on stuff I can’t even remember and thinking we had all the time in the world to worry about saving for retirment. Oh to have a do over with the insights gained over the years. I know I’d do things a lot differently and would be in a position to retire in my mid 40s if I wanted to.

I guess no matter what we accomplish we always see what we could have done better. Human nature I suppose.
David Bibby responded:
Posted: June 29th, 2010 at 2:47 pm
Negative.. underwater on two houses. Besides that my wife and I are debt free.
sarah responded:
Posted: June 29th, 2010 at 2:54 pm
I will be positive. But I’m not right now. CC debt I’m paying off plus a huge student loan debt (pvt school twice–guess what I’ll be recommending the nephews DON’T do?).
Kathryn responded:
Posted: June 29th, 2010 at 4:46 pm
Positive, but it’s a really small number. Post-divorce, I’m debt free, but my only real assets are my recently-paid-for car, retirement accounts, and a budding emergency fund.
Mar responded:
Posted: June 29th, 2010 at 7:30 pm
Positive by about $260K but my daughter starts college in 3 years, so…
Erika responded:
Posted: June 29th, 2010 at 9:48 pm
super negative. and no house. but a few lovely degrees that aren’t being used, so that’s awesome.
Vicki responded:
Posted: June 30th, 2010 at 12:20 am
Negative. Ugh.
Gbeeson responded:
Posted: June 30th, 2010 at 12:57 am
We are so negative we use scientific notation. For real.
Laura responded:
Posted: June 30th, 2010 at 2:42 am
Negative indeed. We bought our house at the peak of the market so it lost over 100K euro in value within the first year.
Eddie responded:
Posted: June 30th, 2010 at 11:03 am
If I wrote an e-mail in all Caps to a client, I’d be fired. What a dolt.

I’m positive but only after including the 401k’s from our respective accounts.
Steady Plodder responded:
Posted: June 30th, 2010 at 12:25 pm
Positive…but still not the # that I’d like it to be. Working on it daily…
Anna responded:
Posted: June 30th, 2010 at 1:14 pm
Just found your blog and LOVE IT! I wanted to give you a blog award! You can find it here:

http://daveramseyroad.blogspot.com/2010/06/two-blog-awards-in-two-days.html

Keep going in the debt battle…you will succeed!
Amanda responded:
Posted: June 30th, 2010 at 2:18 pm
Negative by ~40k. Yay college!
Claire in CA, USA responded:
Posted: June 30th, 2010 at 3:52 pm
Positive. Though we live in CA, barely make ends meet, etc., we bought out house at almost the bottom of the market in 1993, and we have lots and lots of equity. We are nearly debt-free (only a couple thousand), and have IRAs and dh’s retirement accumulation. If I could get my dh to move to Texas, we could be even more in the positive, but for some unGodly reason, he’s bound and determined to stay here and live hand to mouth.
CanadianKate responded:
Posted: June 30th, 2010 at 4:12 pm
Positive.

But first, we are close to the ‘other’ end of life, approaching retirement so we ought to be positive.

Secondly, in Canada, university is subsidized more than in the US therefore the cost was less. Add in a co-op program and a single degree and my dh graduated debt free.

Although that was 30 years ago, this is still possible today. My son-in-law is finishing up his PhD and is also debt free due to “living like a student” from start to finish with my daughter to live like that too. No cable, no car, an awful apartment with no heat right now despite outside temp in the 50′s and ripped apart bathroom that, 5 days later, is still dripping water from the ceiling, nothing is bought new except computers and even those are few and far between.

Finally, in Canada mortgage interest is NOT tax deductible so there is NO benefit from carrying a large mortgage and every incentive to pay off your mortgage quickly. In the past 26 years I’ve owned two houses – our starter home and this one. Once the house was paid off (about 10 years ago) there was no incentive to go back to having a mortgage so we stayed put. Which meant no money spent on movers, real estate fees and new mortgages.

I’m not sure, but I don’t think we’ve ever been negative. After buying our first house our net worth was about $5K. Had we bought a new car at that point, with a loan, we would have been negative but managed to keep the old cars going and replacing them with used so only ended up having one car loan over the years. By the time that car needed replacing, we had enough room on the line of credit on the house to pay for it that way.
Beks responded:
Posted: June 30th, 2010 at 7:59 pm
Whew! I’m not alone!

For all the positives… CONGRATS!! I hope to be with you soon!
Pam responded:
Posted: July 1st, 2010 at 2:22 pm
Postive $350,000, we’re late 40′s and we’ve been lucky to have steady jobs for 25+ years. Most is retirement savings as the housing market is rough in Michigan and I don’t think we could get as much as we paid for our house in 1997… I admire you for working so hard towards your goals – you will get there!
MrsPrettyinPink responded:
Posted: July 1st, 2010 at 11:32 pm
I use mint.com and it calculates it all for you. Just staring at you and yes it is negative to the tune of $68,000.00. I don’t yet own a home and so this is mostly student loan debt. I only have 1 credit card. You have an awesome plan and are sticking to it. So don’t feel bad if right now the picture looks bleek. Good Luck, -PrettyinPink
Bucksome responded:
Posted: July 2nd, 2010 at 2:06 am
We’re positive but that’s because we’ve owned a home (or a mortgage) for 33 years and have lots of equity.

If it makes you feel better, my son and his wife are underwater with their mortgage as it’s only a few years old.
Mike Dunham responded:
Posted: July 2nd, 2010 at 10:32 am
Negative, and our house is not underwater (though not by much). Basically my wife and I both have gigantic grad school loans dragging us down like a boat anchor.

Net worth is one of those “incomplete picture” measurements IMHO. When you do a business valuation, you always look at the potential/probable earnings of the business over some number of years into the future. Why we never do this when calculating personal net worth is beyond me.
Zachary responded:
Posted: July 3rd, 2010 at 2:57 am
Student loans are the reason for my negative net worth. But I fully expect the returns on my retirement investments to outpace my loans. So it should be okay in the long run.
Sisiphus responded:
Posted: September 9th, 2010 at 9:54 am
Negative. My wife and I owe about $470K with assets of $338K. Student Loans account for $225K of our debt. By the way, student loans are evil. They are non-dischargeable in bankruptcy and once you consolidate (like we did) you are stuck with your loan forever. 8% interest adds up pretty fast on that much debt and in a recession, incomes don’t grow to match.

Our lifelong goal is to be debt free when we die.
Chris the Scientist responded:
Posted: September 17th, 2010 at 8:20 pm
Way Negative, currently -$94,000. I went to school for my PhD in science. During this tenure, dw and I had our first child, and my wife decided to stay home. Thus, lots of student debt and about $20K in cc debt. We are both 27.

Thanks to a great job, we plan to pay off cc’s in one years time. And with awesome 401(k) contributions from my employer. So our picture will improve quickly.
Noth responded:
Posted: September 23rd, 2010 at 8:02 am
Uh oh, very simple. NEGATIVE of course.
House worth approx $207.000, mortgage for $232.000, other loans $10.000 and a creditcard with $1.500…
No car, no assets otherwise.
Total negative -$36.500… Which is over my yearly income of $33.250.
Adding to the mix I have $0 in savings or retirement , and I’m 32yrs old.
Steven responded:
Posted: September 24th, 2010 at 10:24 am
Negative

My mortgage and my house value are nearly equal, same with car value and auto debt, very little assets otherwise.

$30,000 Student loans
$5,000 Personal Debt
Steve responded:
Posted: October 2nd, 2010 at 7:19 am
negative by about $40,000 due to student loans
Joseph responded:
Posted: September 12th, 2011 at 3:11 pm
Negative.

My wife and I together owe $100,000 on our school loans. We have $30,000 in the bank and $10,000 in retirement funds. So, we are $60,000 in the hole (I don’t count our cars, as they are depreciating assets). We don’t own property. We are in our late 30s and both work full time. Yes, I’m scared!