The sickness with money continued through my late twenties and into my 30's, but the money I was bringing in was far less. So I got frustrated, tired, and pissed off. I had a HUGE chip on my shoulder towards employers and any wealthy people I saw. The final nail in that coffin was working at PUBLIX. The lesson that job taught me about money was clear. I WAS NEVER GOING TO MEET ANY KIND OF ABUNDANCE (outside of physical and emotional pain)until I left and freed myself from Wage Slavery. So here I am, NO MORE WAGE SLAVE! I own two businesses; Talk Fusion and Nana's Garden. The Money is about to pour in, so I realized I must get straight with my attitude about money. The main difference between the rich and the other classes is they keep their money: It is not how much you spend, it is how much you keep. So here it goes!
Assets and Liabilities
Your net worth is a snapshot of your finances. The picture will change slightly the next time you pay a bill and again, the next time you receive a paycheck. To determine your current magic number, the first step is to take a look at all of your assets, which are anything of value that you own. Make a list of all these items and next to each, list the amount it's worth. These typically include:
Cash -- any physical currency and coins you have
Funds in the bank -- all the money you have in a savings, checking, or money market accounts, and any certificates of deposit (CDs) ( or under your mattress )
Stocks, bonds and mutual funds: also list savings bonds
Retirement accounts -- includes 401(k) funds, IRAs and any other retirement accounts
Life insurance -- counting any cash value you have in the policy
Motor Vehicles: the current blue book value of any cars, motorcycles, boats, RVs, etc.
Real Estate -- the current market value of property (house, condo, land, etc.) you own, even if you have a mortgage
Personal Valuables -- including the market value of jewelry, collectibles (from baseball cards to art) and furniture
Money you're owed -- as long as you have a reasonable expectation of being paid back [source: Sahadi]
In reality, just because you own these assets doesn't mean you'll be able to access their monetary value today. Only cash and other highly liquid assets -- things that you can exchange for a good market value quickly -- are easily accessible. Although it might take months to turn real estate into its true cash value, use the full market value when calculating your net worth today. If you're unsure of what something you own is worth -- like an antique -- is worth, find a professional appraiser.
When you're done listing assets, make a separate list of liabilities and amounts. Liabilities are any debts or payments you owe to someone else. Here are the most common:
Mortgage -- the principal or amount you have left to pay on your mortgage(s)
Home equity loan -- how much you owe if you have a home equity loan
Automobile loan -- the amount you have yet to pay on your car(s) and other motor vehicles
Student loans -- the amount left on student loans
Credit card debt -- any balance owed to a credit card company
Liabilities DO NOT PAY YOU. Any Stuff you buy to keep up with the Jones' is a Liability.
Once you're finished taking stock of all of your assets and liabilities, it's time to calculate the magic number.
Calculating Your Net Worth
Now that you've gathered all the information about your own assets and liabilities, you may find the next part easy. You'll simply need to add up all of the amounts listed under assets, and separately, add up all of the amounts listed under liabilities. You should end up with two numbers: a grand total of assets and a grand total of liabilities. Finally, subtract the total liabilities from the total assets -- and, voila! You have your net worth.
The formula can be expressed simply as:
Net worth = assets - liabilities
This net worth calculation tells you where you stand at this moment, so you can figure out what to do next.
As simple as this calculation is, take it with a grain of salt. This single number doesn't paint an accurate picture of your whole financial situation. For instance, if you're a recent college grad and are just starting to pay off hefty student loans, a very negative net worth is expected and doesn't necessarily reflect badly on your finances. However, it does mean that to realize financial goals soon, you'll have to work to pay off those debts quickly.
If you're older and worried about negative net worth, it's time to take more dramatic steps to get out of debt. This includes making a budget and restricting unnecessary spending. Dedicate larger and more frequent payments toward paying off debts. If you're considering debt consolidation, realize that this will probably mean taking on a higher interest payment and could put you in deeper debt for longer, if you're not careful.
If you find you have a positive net worth, consider investing if you haven't already. No matter if you have a positive or negative net worth, it's important to consider your personal financial profile when moving toward your financial goals. This will mean periodically recalculating your net worth to see how you're doing.
Net worth isn't just useful for personal finance. Some economists look at the net worth of the public to understand the financial health of a nation. The U.S. Federal Reserve studies the average net worth of Americans. When the housing and stock markets suffer, so does the average net worth, as assets that people hold, like homes and stocks, decline in value.
It is important to start looking at what you spend your money on. The difference between what the rich and poor spend on Pay day is HUGE. START SPENDING LIKE A MILLIONAIRE NOW or you will always find poverty. Watch this Video, and get to studying!
"Calculating Net Worth." PathtoInvesting.org. Foundation for Investor Education and Lightbulb Press, Inc. 2006. (July 17, 2008)
"Median Net Worth Declines." All Things Considered. National Public Radio. July 3, 2008. (July 17, 2008)
Luhby, Tami. "Americans $1.7 trillion poorer." CNNMoney.com. June 5, 2008. (July 17, 2008)
Sahadi, Jeanne. "How much are you worth?" CNNMoney.com. Aug. 20, 2004. (July 17, 2008)
Talk Fusion - Video Email