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I am having trouble measuring the total value of my assets. Let me explain;

Let's say I have 100€. By doing some foreign currency exchange, I have managed to obtain 110€, so one might say that I have more money than what I had when I have started (assume that the time spent was too short, so we can ignore the interest I could have earned for the principal).

But, the economy is a dynamic entity and I know the ultimate purpose of having money is to get product or services now or in the future. So, we can measure the value of money by how much it buys a service or a product. But, it might be that, during my transaction, £ or $ went up, so I can't but the same amount of product or services with 110€ as I would if I had it before.

That is why I can't find a proper way to measure how much value I have added to my assets by "earning" an extra 10€.

Question:

How to measure the total value of the money you have, in a - hopefully - static way?

Our
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    Basket of goods – Rodrigo de Azevedo Jun 21 '20 at 10:20
  • Basket of goods doesn't transcend exchange rates/purchasing power variations between countries. Purchasing power parity is not static, exchange rates aren't static. The sensible measurement is based on your local currency, since that's what you will primarily buy things with. – Hart CO Jun 21 '20 at 15:53
  • "let's say" -- is this a practical problem that you face? You have some Euros but you in fact do all your spending in pounds and dollars? This doesn't feel like personal finance to me. – Kate Gregory Jun 21 '20 at 17:19
  • @KateGregory why? can't one operate with more than one currency at once? – Our Jun 21 '20 at 21:27
  • Sure. I occasionally buy things in other currencies. But such a large percentage of my personal spending that I lose all knowledge of whether my hundred thousand euros really represents the amount of money it once did? No. – Kate Gregory Jun 21 '20 at 21:29

1 Answers1

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Because there is no proper way. A lot of things are fluid, including the value of goods and services. I.e. a bad harvest may send certain food prices up. This is COMPLEX and generally done with a basked of goods (to measure inflation) and a permanent topic of discussion of what belongs in this basket.

There is no static way to measure something whose composition is fluent.

TomTom
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