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 debt, which most likely pulls their net worth below zero (since student loans have no value as on asset, only as debt). My wife and I were able to pay off our loans in full a few months ago, so our net worth has been vaulted into the positive (yay!).
You’d Be Less Inclined to Spend Foolishly
If your net worth was visible to everyone, you might choose to spend your money a little more wisely. As you purchase your cappuccino, donuts, and expensive lunches (expensive means more than $5 because you can eat for way less than that at home), your number would visibly go down. It would be an instant reminder that every purchase makes a difference!
Those Joneses Wouldn’t Look So Cool Anymore
Often times, we envy the lives of the “Joneses“. They’ve got brand new luxury cars, a huge mansion of a house, and a large boat in the driveway. They look like they’ve got all the money in the world and your tiny house and 15 year old car have always made you feel inferior.
You may have wondered to yourself at some point, “How in the world can they afford all of those things on their salary? We perform the same job, so our incomes can’t differ that much!” Typically, the answer is debt. They have tons of it and you don’t.
If their net worth number were hovering above their head, it would most likely read, “$0.17”, or something like that, because their boat and cars are depreciating assets. They took on a large amount of debt to get them new, but today, their values are most likely less than what’s owed, causing their net worth to slump considerably.
As for you, you have $40,000 of equity in your house and your cars are fully paid for, plus you have a retirement plan that’s worth $45,000. Your net worth is most likely somewhere around $100,000!
Suddenly, those Joneses don’t look so impressive do they?
The next time you see those flashy neighbors, picture them with that dollar sign over their heads. Then remember what yours reads. Hopefully this will keep you on track with your financials and keep that smile on your face. 🙂
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.