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Net wealth isn't worth the time to figure out

DEAR BRUCE: I like to periodically calculate my net worth to gauge how I am doing and as motivation to improve my savings rate.

How do I place a value on my military retirement for the purpose of figuring my net worth? Is the cost to purchase an annuity that pays the same as my retirement check a fair measure of value? — R.G., via e-mail

DEAR R.G.: Figuring out net worth is a difficult proposition. For business purposes, one excludes the value of a personal home. But for average citizens, that is a significant portion of their net worth.

By bringing up your military pension, you are basically asking how much money is needed to generate the pension.

For the sake of discussion, let's assume the pension is $50,000 a year.

At a 10 percent return, it would take $500,000 to generate the $50,000, and that is a nice number to be aware of.

On the other hand, if you had the $500,000, you may do better, you may do worse and the principal will be left to your family should you die an early death.

In the case of pensions, sometimes it goes away entirely and in other situations, it is paid in a reduced way.

I wouldn't worry about your "net worth." My advice is to sock away as much as you comfortably can.

That doesn't mean to stop living. But it does mean to pay yourself a modest amount every month, and over a period of time, you will be happy with the results.

DEAR BRUCE: My husband just received the news that his identity was stolen last year, and the person responsible has done a great deal of damage to his credit rating. So much damage, in fact, that our bank laughed when he applied for a loan to pay off a high-interest debt. The police report has been filed, but they are less than optimistic and they told us not to hold our breath (even though we know the responsible person's current address and phone number). The real problem is that we are young newlyweds and, while my credit rating is excellent, I do not have enough credit history to qualify for much on my own. So, in the rising economy of Edmonton, Alberta, we are unable to join the real-estate market and unable to qualify for credit of almost any sort. Do you have any advice? We are too young to be in this much "trouble." — K.B., via e-mail

DEAR K.B.: I am sympathetic to your difficulties; identity theft is a major problem. You mentioned that you know the people responsible. Is it possible they are related to your husband — either by blood or work? This is often the case.

To straighten this matter out, you will have to deal with all three of the credit agencies. If you contact each one, it will tell you how to ameliorate the damage. You indicate that you have a high-interest debt — what is it? That could be more of a stumbling block than the identity theft. Though you have excellent credit, your credit history — and perhaps your income — is working against you. This is part of the penalty for being young.

I wouldn't fret too much about getting into the "real-estate market." If you mean to buy a home, that day will come. But I think you are expecting too much too soon. Go about contacting the credit-reporting companies and start the interminably painful paperwork. Bear in mind, it may take as long as a year to get that done. You have a long life ahead of you. Don't get too frustrated.

DEAR BRUCE: I recently married, and my husband and I have a prenuptial that keeps everything separate. We are both in our early 50s. We keep all monies, accounts and investments apart, as they were before the marriage. We would like to also continue filing separate tax returns (as we did before the marriage). Can we file as "single," or must we file as "married filing separate"? We are committed to keeping all our finances independent of each other. — R.P., via e-mail

DEAR R.P.: I understand what motivates your thinking, and I have no problem with it. However, you will have to file "married filing separate." End of story. There will likely be some penalty or additional tax because you're not filing a joint return. If you are determined to keep everything separate, you may very well choose to pay the additional tax.

DEAR BRUCE: We just rented a car on our last vacation. My wife gets nervous at the thought of getting into a wreck and having to pay an exorbitant amount of money for damages. She insisted that we sign up for the extra insurance offered by the rental agency. Is this really necessary? — Reader, via e-mail

DEAR READER: Before renting a car, check with your card company to see what it offers in the way of collision insurance. If you charge all of your expenses on that card, the collision may be paid for. In addition, check with your insurance broker to see whether you are covered in the event of an accident behind the wheel of another car. In most cases, collision, comprehensive and liability apply to any car that you drive. Finally, if you're nervous about this and only rent a car once a year, take the coverage. This is not particularly good advice, but for a few extra dollars you get peace of mind.

Bruce Williams is a columnist for the Newspaper Enterprise Association. Send questions to Smart Money, P.O. Box 503, Elfers, FL 34680. E-mail to bruce@brucewilliams.com. Questions of general interest will be answered in future columns. Personal replies cannot be provided.