Answer extracted from the Your Next Dollar: Money Management for High Earners podcast — listen to the full episode below.
When should someone think about depreciating assets like cars when calculating net worth?
Include depreciating assets like cars at their Kelly Blue Book value when you're starting out, to build momentum and see a complete financial picture. Once your financial position strengthens, remove these assets from your net worth calculation because you'll typically need to replace the car when you sell it, making any net worth gain purely illusory.
The two-stage approach: momentum first, accuracy later
When you're just getting started with wealth tracking, counting your car matters psychologically and practically. Including depreciating assets at Kelly Blue Book value gives you a complete snapshot of where you stand and helps you feel the early wins as your net worth grows. A beginner needs momentum and confidence, not a stripped-down calculation that ignores real assets.
The strategy shifts as discussed in the podcast episode on net worth tracking—once you reach what Andrew Giancola calls "a good cruising altitude" financially, you stop counting cars. The reason is simple: replacement cost neutralizes the illusion. You might list your car at $25,000, but the moment you sell it, you need another vehicle. That purchase erases the net worth benefit, leaving you no richer than before the sale.
This mirrors a broader principle in wealth building: distinguishing between paper gains and actual liquid wealth. Your car serves a function, not an investment.
Why the transition matters for your financial scorecard
Early-stage net worth calculations benefit from including all assets because clarity about what you own—and what it's worth—anchors your baseline accurately. But as your portfolio matures and investments begin outweighing lifestyle assets, the focus must shift. Ryan, as a financial advisor working with high-income clients, emphasizes net worth as the single most important financial metric on your scorecard.
For those building substantial wealth, listening to how Andrew and Ryan define net worth composition reveals why professionals eventually strip out cars and other depreciating items: they want to track real wealth accumulation, not the churn of necessary replacements. A comprehensive understanding of this shift helps high earners avoid the millennial trap—appearing wealthy on paper while lacking actual liquid assets.
"You are your own business owner, even if you are a W-2 employee in that you are selling your time and your energy and your expertise and you should sell it to the highest bidder."
Ryan — Financial Advisor specializing in net worth tracking and tax optimization for high-income clients. Ryan works with high earners to build wealth strategies, optimize RSU compensation, and structure their financial statements to reflect true net worth rather than inflated paper gains from depreciating assets.
See also
How frequently should someone track their net worth?
Track net worth no more than quarterly and no less than annually. Checking it monthly is overkill and checking daily creates a roller coaster effect that distracts from long-term wealth building.
What is the millennial trap and how does it relate to net worth composition?
The millennial trap occurs when people are millionaires on paper due to home value and 401k retirement accounts but have no liquidity outside of these assets, creating a false sense of wealth.
How should someone value their home when calculating net worth?
For homes purchased in the last one and a half to two years, use the purchase price as a conservative estimate. For homes owned three to ten years or longer, reference Zillow or request a professional appraisal.
Key takeaways
- Include cars at Kelly Blue Book value when building your first net worth snapshot to establish a complete baseline and maintain early momentum.
- Remove depreciating assets once your financial position strengthens, because replacement costs offset any net worth gain from the sale.
- The shift from including to excluding cars reflects the difference between paper wealth and liquid wealth—a critical distinction for serious wealth builders.
- Net worth composition matters more than raw net worth; high earners must distinguish between assets that generate wealth and those that merely consume it.