Who Should Know About Your Net Worth
I recently came across Dave Ramsey’s “Millionaire Theme Hour” on YouTube. For those of you who don’t know, Dave Ramsey has a very popular financial planning show, and the “Millionaire Theme Hour” is a segment where “common” people announce their net worth and then answer Dave’s standard questions to explain how they managed to save so much on relatively normal incomes. I went back to review a recent segment to write this piece and up pops a picture of Glenn and his wife from Oklahoma City, Oklahoma with the clear heading that their net worth is $5.5 million. The 8-minute segment is inspirational as Glenn explains the saving and discipline it took to create a net worth that large, but I can’t help but think it is a bit dangerous. In my mind, when it comes to finances, it’s best to keep things close to the vest. Your view may differ, and I respect that, but let me explain my concerns.
First, just to be clear, a person’s “net worth” is the total fair market value of all of a person’s assets (e.g., bank accounts, real estate, investments, retirement plans, etc.), MINUS all outstanding debt. If someone owned nothing but a $300,000 house with the mortgage paid off and a bank account with a $20,000 balance, then their net worth would be $320,000. If that person still owed $100,000 on their mortgage, then their net worth would be $220,000 ($300,000+$20,000-$100,000). It’s natural to work toward increasing your net worth, and crossing the one-million-dollar mark is a big accomplishment, as are all the subsequent million-dollar thresholds.
My first problem with sharing this information concerns relationships. You never know how someone will react once they compare what you really have with what they guessed you have. I’ve seen children drastically change expectations regarding all sorts of things after they become aware of the large amount of wealth their parents have accumulated. The same holds true of friends and more distant relatives. I’ve also seen friends and relatives assume a much larger net worth then really exists. Money, or more importantly, information about someone’s money, can change people.
My second problem concerns fraud. We all know there are some terrible people lurking out there just looking for opportunities to cheat, steal or otherwise swindle. Announcing an impressive net worth on the internet, along with your picture and the city you live in, seems to me to be a recipe for problems. These days that is enough for a determined crook to figure out exactly where you live and who you and your family members are. In my book, that’s not a good idea.
I’ll share with you a personal change that has occurred for me over the span of my professional life. I worked very hard and built two successful businesses that I still love to work in. I have been rewarded in immeasurable ways by having wonderful client relationships. I will tell anyone who asks about the personal rewards of a holistic estate planning/financial planning practice. But our net worth will always stay private. In part, the more my wife and I have accumulated, the less we seem to care about what we’ve accumulated (isn’t life funny!).
I certainly don’t want strangers to know what I make or what I’m worth. When I financed my last car because of the great interest rate, I had to fill out a loan application. I put down the absolute minimum income level and net worth I thought would get me accepted for the loan instead of the actual numbers. Who knows where that information ends up?
Someday I’ll probably share all the details of our investments and net worth with my two sons, but the goal there will be to make sure they help my wife with it after I’m gone. They’re both in finance and my wife has little interest in investing. But other than that future event, I’m not comfortable sharing much information in that regard. I think it can do more harm than good.
Side Note: Please don’t confuse what I stated above with not keeping clear records with instructions and details on assets. We all should strive to make things as easy as possible for our loved ones if something unexpected happens. Once you are gone, your family should have a clear roadmap concerning all of your finances.
Fun Fact: YouTube was created in 2005. The first video uploaded on YouTube was titled “Me at the Zoo” and was posted by co-founder Jawed Karim on April 23, 2005. Today there are 4.3 billion videos on YouTube. It is estimated that every second, 6 hours of videos are uploaded to YouTube.
