Net Worth

Net worth? What is it? Why is it important? Why track it?

Welcome to our preview issue of Money Matters.

We will be to the point and all posts will be about one minute in length. Everyone is busy, but when it comes to your financial education you need to become educated on financial terms, concepts and wealth building!

Today we will discuss net worth how to measure it and why.

Simply calculating net worth: assets less liabilities equals net worth.

Asset

What is an asset? An asset is something you own. Some examples are a house, car, land, business, investments (stocks, bonds, precious metals) and a coin collection.

Liability

A liability is something you owe to someone else. A mortgage, a credit card, a promissory note and a car payment.

Example

Looking at a simple example, you have a house that has a value of $300,000 and the mortgage on the house is $250,000. Your net worth would be $50,000.

Since the house is what is known as an appreciating asset (goes up in value) the value of your home can increase. As you make payments on your mortgage your liability will decrease. These factors will increase your net worth.

Wealth Measurement

Measuring your net worth lets you know where you are in your accumulation of wealth. This is how you measure your wealth not based on income. Income is not how you measure wealth, if you are a millionaire or billionaire. It is based on net worth.

Your overall objective is to accumulate assets that increase in value, such as real estate, investments.

Eliminate debt

Eliminate debt as quickly as possible. See our article on becoming debt free here.

To sum up net worth is how you measure your wealth. One’s income is not how you measure wealth.

Build assets, eliminate debt grow your wealth.

So get started building your wealth accumulate assets, income producing assets are the best.

Beginning this week look for our articles on creating the foundation for wealth building.

Our series Money Matters will continue to educate our readers on wealth creation!

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