Over a period of time, we have a tendency to accumulate a lot of “stuff” in our lives, and once we’ve got it in our possession, we usually cease to think about it in terms of what it costs or what it is worth. It stands to reason that if you have bought something for your own use, it doesn’t really matter to you how much it cost - because you’re not really planning to buy it again for a while. However, every once in a while it is a good idea to have an audit of your assets so that you can know exactly what you have to your name.
Below, we will look at the reasons why it may be important to have an up-to-date value on certain items, and how you can go about achieving this audit. Once you have audited items, it’s worth updating the value at least once a year, and potentially more often depending on why you need the valuation.
If you’re planning to insure items
Insuring your valuables is simply sound financial sense. With the potential for freak weather events, theft and loss by other means, it’s much better to have insurance and not need it than the opposite. If you’re going to get the most from your insurers - and you want to pay the most realistic premiums - knowing what they are worth is essential. So you can run your car details through Edmunds, get a realtor to value your home (or use an online source for future updates, and have a pawnbroker look over any collectibles to get a realistic picture.
If you’re planning to sell items
There is a phenomenon known by psychologists as the Endowment Effect, which in short means that you personally place a higher valuation on an item because it is owned by you. It’s related to sentimental value, and it’s not going to help you sell anything. That’s because while you may be absolutely adamant that you’re not going to accept a penny under asking price for that grand piano, the person who wants to buy it doesn’t care that it’s been in your family for five generations. An independent valuation will help you get a fair price for items of value.
If you’re making or updating a will
You can begin the process of making a will at any age, but it is something you’re likely going to update several times before it becomes definitively relevant. In the USA every year, somewhere between 0.5% and 3% of wills are contested. That may not seem like many, but it’s statistically significant. Having an up-to-date valuation on any assets you plan to bequeath will limit the chance of unpleasant, divisive probate cases after you’re gone, and will allow you in life to make your will in a fair, realistic way.
Knowing the value of items that belong to you - and not just the value that you place upon them - can be crucial for a number of reasons. It makes sense to keep on top of the value of your assets by auditing them on a regular basis, and the tips above will help understand the process.
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