Did you realize that you could save up $500 every single month for a year, put it in a super-safe bank account, and still lose money when it comes to your overall net worth?
It took me quite a while to truly understand it, but cash in your bank account and your net worth dollars are two very different things.
What Is Your Net Worth?
So what is a net worth really? I’m sure you already know that wealthy people have a high net worth and poor people have a nearly non-existent net worth, but how is it really calculated? As opposed to many things in life, the net worth calculation is actually very simple.
Net worth = Assets – Liabilities
In other words….
Net Worth = What you own – What you owe
Here’s an example of a typical person’s net . . . → Read More: What is Your Net Worth? And Which Way Is It Moving?
Have you ever had anyone ask you where your net worth is? I highly doubt it, but it is an incredibly important question! First of all, what is net worth anyway? And why should you be concerned with what makes up your net worth number? These are great questions and will all be addressed in this post!
How to Calculate Your Net Worth
This term is often thrown around, but very few people can actually tell you what their net worth is. Basically, your net worth is the total value of everything you own minus the debts you need to pay. Here is an example to show you how to calculate your net worth:
House – value of $175,000 Car #1 – value of $20,000 Car #2 – value of $10,000 401k – value of $20,000 Total Assets = $225,000
Mortgage – $160,000 Car #1 – $15,000 Student . . . → Read More: Where Is Your Net Worth?
Have you been trying to improve your net worth lately? If you have, congratulations! You’re already miles ahead of the typical American. For the most part, the majority of the population is so worried about what people think about them that they never even measure their own net worth. I mean think about it. The average person has a car loan, a pretty beefy mortgage, and some credit card debt. It they keep this lifestyle up throughout their life, their net worth will never get above $20,000! Believe me, I’ve seen it.
I first started thinking about my net worth in 2010 and made some great decisions to pay off my student loans early and to start investing in my future. Take a look at the graph below. This shows you my entire life after graduating from college in 2008.
When I got out of school, I had . . . → Read More: Massively Improve Your Net Worth With This Plan
Do you ever find yourself comparing financial status to that of your friends? I think we all do it from time to time. We might not ask them details, but based on their job and their lifestyle, we can get a pretty good idea of where we rank in relation to them. The only question is, what are you using as a comparison tool? Are you comparing you salaries? If this is the only means of your comparison, then you are absolutely a broke thinker.
Of course, you’ll never really know all the details about your friends’ earnings or their total savings, but you really don’t need to worry about them. The only info that should really matter to you is your own.
There are two major factors that determine your current and future wealth. If you score well in both of these categories, then you are well . . . → Read More: Your Wealth Is More Than Just Your Net Worth
I often wonder how well I’m doing financially in my life. I look around at people that are driving Mercedes and BMWs and sometimes I think that I’m way behind in the net worth category. But, do these people actually have a large net worth (assets minus your debts)? Or, are they deeply in debt and just trying to appear wealthy? There’s just not a good way to know!
As I was perusing CNN Money the other day, I realized that they had a helpful calculator related to the median net worth of U.S. citizens. After typing in my age (the spry, young age of 26) and my yearly income, this calculator gave me the average net worth for my age bracket and also the net worth for our household income.
Here’s the link, try it for yourself! http://cgi.money.cnn.com/tools/networth_ageincome/index.html
So, according to this CNN Net Worth Calculator, . . . → Read More: Is Your Net Worth Below Average?
Do you ever think about your net worth? Do you ever think about what someone else’s net worth might be? What if everyone’s net worth were displayed above their head, everywhere they went? These are the types of questions that run through my mind (for some reason) on a daily basis.
What’s Your Net Worth?
For those of you that don’t know, net worth is simply the value of your assets minus the amount of your debts. If your assets are worth more than your debts, you have a positive net worth! If not, then you net worth is negative.
How would you feel if your net worth was displayed over your head? Would you feel proud? Or, would you be embarrassed? I think if my net worth was displayed for all to see, I would feel ok about it. Most people my age are still hanging onto student loan . . . → Read More: What If Your Net Worth Was Revealed?
My wife and I were driving in to work this morning, and we witnessed a scene that has become very familiar. As we were waiting to turn left on N. Military Trail, a scraggly man, approximately 45 years of age, slowly walked the median as he held a water bottle in one hand and a sign that read, “Ice Cold Water, $1.00” in the other. Based on the man’s clothing and cleanliness (or lack thereof), I assumed that he was homeless.
On average, I would say that this man makes $10 an hour with his water bottle sales. He most likely has no home and has very few possessions. Because he has no occupation and lacks many of the toys that we consider essentials, we often feel that we are ‘above’ him, but are we really?
Many of the individuals I work with are completely enamored with stuff. If you’ve . . . → Read More: Could a Homeless Man Have a Higher Net Worth Than You?