[pitaj]

That doesn't seem even remotely true. Taking on large amounts of debt can be risky in many cases. But consider the following case:

- newly purchased $150k home with down-payment of $30k

- $80k savings / investments

- $20k car

- $80k/yr income

This person is not at risk, but they have a net worth of $[30k + 80k +20k - 150k] = $-20k

[bdowling]

Your math is off. The home is an asset worth $150k plus a liability of $120k for the mortgage, for a net positive $30k. That puts your hypothetical person with a net worth of positive $130k, not negative $20k as you calculated.

[ericd]

When valuing a business, you typically look at the discounted future cash flows in addition to assets/debt. Basically, you factor in their profitability and calculate the current value of owning that stream of cash flow. People have cash flows as well. So even though people typically only count assets/debt, Marc effectively has a net worth substantially higher than -$20k if he’s saving more than he’s spending, which jives better with people’s intuition about Marc’s situation.