First Things First, Know Your Net Worth
Assets - Liabilities = Net Worth. Sounds simple, but not so fast! I speak to a lot of people, that don't understand the concept, nor the importance, of knowing their net worth. It may be scary, but you have to know these numbers. What is classified as an asset? What constitutes a liability? What does it matter? Who cares?
Listen, put your current yearly salary in a bag and put it outside in the backyard somewhere. In this first, and most important, exercise of figuring your net worth, you won't need to even think about your salary. Forty years from now no one will care 2 cents about what your salary is today!! Seriously, its a frivolous figure that has no meaning once you leave this earth. When you perish, and we all will cause no one's made it out of here alive, you can't leave your salary for your kids and your grandkids!! But you can leave your net worth!! Your net worth stays and helps those that remain here. Your net worth can help your community when you are long gone. Your net worth can be a blessing to others when you are no longer here. Your net worth is also your retirement, what you have left, what you can live on in your older age, and your net worth will ultimately defines your standard of living when you get older! Your net worth matters more then most of us care to imagine. Can your salary help your net worth? Yes. But do you have to have a substantial salary to have a substantial net worth? NO! This may sound controversial to some of you reading this, but you need to sort of minimize your focus on your salary and focus the vast majority of your time, energy, and efforts, on your net worth!!
I'm going to keep the rest of this simple and to the point. An asset is what you own. Assign a value to it that's as accurate, factual, and realistic as possible. Sometimes you have to assign an accurate approximation of a value to an asset because it's actual value isn't known until it's sold and it's not being sold because its in your possession. A liability is what you owe. It's easier to be accurate and factual with a liability because what you owe is known, just call your the company or person you owe the money to and they will be happy to give you that information any time. The difference between your assets and your liabilities is your Net Worth!
Get out the calculator and figure it right now. Chances are you have a calculator on your phone right now. You may be shocked to learn what that figure is, or you may be scared to look at it and avoid it like the plague. The fact is, you need to know it. In fact, you need to compute this figure about every six months or so and develop goals around how you plan to add to this figure before the next 6 months. This is an excellent goal setting exercise.
It's vital that you develop a plan for you and your family. Figuring your net worth on a bi-annual basis and developing goals around increasing it, sets you and your family up for success, and unfortunately will set you far apart from most people. Yes, on average, Black Americans with the same education and training, earn less money for the same jobs as our counterparts. However, that does not stop us from saving, investing, keeping our money, and building our net worth. Understanding and learning what your personal net worth is, and developing ways to regularly increase it, are things that can be done by anyone, regardless of your circumstances.
There are many things we will dive into on this blog. Money, Personal Finance, Business Building, etc. I plan to share information about how I started a successful ebay business, how I've managed and ran a successful, and sometimes not so successful, real estate business, and other personal financial tips to help us with our money. I plan to dig into the details of figuring your net worth, reducing your debt, building your net worth, and many other things. But, First things First!!! You have to know where you are financially to start and you have to build up your "money-focus-muscles-and habits".
Start with Knowing Your Net Worth!!!