how to calculate net worth and why it matters...
I've been talking a lot about calculating net worth lately and you might be thinking... who cares about net worth?
Growing your net worth is probably something you'll get to “someday” but you have these other goals right now and you might think that your growing your income is the only thing that matters.
But net worth will tell you if the thing you’re putting your money into will grow your money for you WITHOUT having to grow your money!
Think about it:
something that will make you more money WITHOUT WORKING is investing in a 401K or buying a house.
These things are assets. You pay for them once and they continue to build MONEY!
While something like a car:
doesn’t build net worth.
It depletes in value once you drive it off the lot.
Let's talk about what net worth means:
Net worth meaning:
Your assets are anything of value that you own that can be converted into cash.
Examples include:
investments,
bank and brokerage accounts,
retirement funds,
real estate and
personal property (vehicles, jewelry, and collectibles)—and, of course, cash itself. Intangibles such as your personal network are sometimes considered assets as well.
Your liabilities, on the other hand, represent your debts:
loans,
mortgages,
credit card debt,
medical bills, and
student loans.
The difference between the total value of your assets and liabilities is the net worth formula.
If you want a quick and easy way to calculate your net worth, sign up at Mint and you can connect your bank accounts, search for your home's value, connect your retirement/brokerage accounts and find your net worth.
My current net worth is: $2,157,340.38 (that's from mint)
Here's why it matters more than hitting your income goals in your business:
Your net worth is a big picture look at your finances
It will give you guidance on what needs to change in your financial situation.
Reviewing your net worth statements over time can help you determine:
1) where you are
2) how to get where you want to be.
This can give you encouragement when you are heading in the right direction (i.e., reducing debt while increasing assets) and provide a wake-up call if you are not on track
You know why I love calculating my net worth though:
It tells me if I'm wealth building or wealth depleting.
Your bank account won’t tell you that.
It tells me if I'm making the right choices with my money or if I'm on track to make the right choices with my money.
It can feel easy to get narrow minded with our money and only focus on the small things instead of zooming out and looking at the big picture.
Instead of trying to spin our wheels and wake up one day at 55 realizing we didn't put anything away for retirement or we don't have a home to live in.. we can take a step back and look at our big financial choices and ask ourselves:
Am I wealth building or wealth depleting?
This really gave me the kick in the pants this year to pay off debt... I started to realize how many of my financial habits were wealth depleting.
If you feel terrified of checking your net worth I have something for you!
It’s an entirely different way to start thinking about money.
I ask you a couple questions about money and you’ll start to uncover maybe what’s going on with this fear and how we can move past it.
We’ll uncover your FINANCE FEARS….
Grab this journal and reply back to each question.
I answer each one personally!
and I found that I truly wanted to be a wealth builder.
I wanted the homes, the safety, and the feeling that my money was working for me.
Okay so challenge for you:
Find your net worth today.
1) Sign up at Mint
2) Connect your accounts, and
3) Calculate your net worth
4) Message me here and
