Assets vs. Liabilities: What Counts and What Doesn't

Net worth is simple arithmetic — assets minus liabilities — but only if you classify things correctly. Most people overstate assets (counting depreciating possessions at purchase price) and understate liabilities (forgetting tax debt, deferred maintenance, or balances at family members). Here's the clean version.

Real assets

• Cash: checking, savings, money market, CDs at current balance
• Investments: brokerage, 401(k), 403(b), IRA, Roth IRA, HSA, 529 (if reclaimable), crypto at market value
• Real estate: home, rental property, land at current market value
• Vehicles: cars, motorcycles, boats, RVs at Kelley Blue Book private-party value
• Business equity: ownership stake in a company at conservative market value
• Receivables: money owed to you with a written agreement and credible repayment

Not assets

Furniture, electronics, clothes, kitchenware, and everyday personal property. These depreciate the moment you buy them and have no resale market that justifies the time to track. Future income (salary, pension, Social Security) is not a current asset. Insurance policies aren't assets unless they have cash value (whole life), and even then count only the surrender value.

Real liabilities

• Mortgages and HELOCs at current principal balance
• Auto loans at current payoff amount
• Student loans, federal and private
• Credit card balances (full balance, not just minimum due)
• Personal loans, BNPL balances, medical debt
• Tax debt to IRS or state
• Business loans you've personally guaranteed
• Money borrowed from family that you intend to repay

The gray areas

Engagement rings, collectibles, and jewelry: count only with current appraisals and an honest resale market. Cryptocurrency: count at current price; review monthly. Vested company stock: count at current market price; unvested grants don't count until vested. Pending lawsuits or judgments against you: count as a liability if probable.

The Kiyosaki distinction

Robert Kiyosaki famously argued that 'your house is a liability' because it costs money to maintain. For accounting purposes, this is wrong — equity in a home is real wealth. For cash-flow purposes, his point holds: a paid-off rental that generates income is a different animal than a primary residence. Both go on the balance sheet, but treat them differently when planning.