Net Worth
Tracking your financial situation by the “stuff” you own vs. your net worth is a recipe for disaster. Why?
Tracking your financial situation by the “stuff” you own vs. your net worth is a recipe for disaster. Why?
Most “stuff” depreciates in value soon after you buy it. The expensive car drops in value 50% or more in a few short years. The computer and phone end up being old and out of date soon after turning them on. That gucci purse that ran you a small fortune, might bet you $10 at the garage sale.
“Stuff” takes you in the wrong direction financially no matter what you age and no matter what your circumstances. Reject a materialistic life (identifying yourself by the stuff you own) and you will be rewarded with more of your money to save and invest for your future. Next up? The net worth statement.
The net worth statement takes your assets and subtracts your liabilities to get you the financial balance sheet that tells you how you are doing at that moment in time. You know you are on a better path when it improves year by year. How do you go about doing that?
Buy appreciating assets (go up in value over time). There are a limited amount of these. (stocks, bonds, and Real estate are the primary three). Keep your costs low when doing it (no-load index mutual funds), and while your at it, pay down debt that will reduce the interest you pay over time. Wealth to follow!
Most “stuff” depreciates in value soon after you buy it. The expensive car drops in value 50% or more in a few short years. The computer and phone end up being old and out of date soon after turning them on. That gucci purse that ran you a small fortune, might bet you $10 at the garage sale.
“Stuff” takes you in the wrong direction financially no matter what you age and no matter what your circumstances. Reject a materialistic life (identifying yourself by the stuff you own) and you will be rewarded with more of your money to save and invest for your future. Next up? The net worth statement.
The net worth statement takes your assets and then it subtracts your liabilities to get you the personal financial balance sheet that tells you how you are doing at that moment in time. You know you are on a better path when it improves year by year. How do you go about doing that?
Buy appreciating assets (go up in value over time). There are a limited amount of these. (stocks, bonds, and Real estate are the primary three). Keep your costs low when doing it (no-load index mutual funds), and while your at it, pay down debt that will reduce the interest you pay over time. Wealth to follow!