Your Net Worth Untangled: How Your Net Worth Positions You to Build Wealth and Save

4 minute read

“If you think education is expensive, try ignorance.” ― Robert Orben

Most of us live in ignorance regarding our finances, and it may be costing us. One study found that 95% of the people they surveyed had no idea what they're net worth was.

But a realistic picture of your financial health enables you to make smart money decisions based on fact rather than fiction. This knowledge also has plenty of emotional benefits as well. Net worth is a formula you can use to determine whether you're broke or in good financial health so you can make wise spending and giving decisions.

What is a Net Worth?

Net worth can apply to companies, governments, countries, and individuals. We're focusing on the definition as it relates to a person or family (individuals).

Your net worth refers to your overall financial health or position. It is the value of your assets minus your liability. In other words, it is how much money you have left over once you subtract your debt from things you have that are valuable.

Examples of Assets

Some examples of assets might be cash, retirement accounts, investments, and homes. Add to this list anything you could convert to cash and wouldn't need to pay back.

Notice that I didn't add consumer items such as TVs, stereos, cars, and clothing. I'd recommend not adding these items because you'll probably never sell them and the value depreciates over time. If you have baseball cards or collector items that are increasing in value, feel free to add those to the list. Just make sure you get an accurate estimate of what they're worth.

Examples of Liabilities

Examples of liabilities would include student loans, auto loans, credit card debt, mortgage debt, and money you've borrowed from friends that you're expected to pay back. Be sure to include any and all debt you still owe on as a liability.

When I was working in the financial planning industry, clients would always refer to car loans and students loans as bills. These things are not bills. They are debt. Calling loans what they are is the first step to eliminating them.

Joseph Solomon Explains Net Worth

Joseph Solomon has a funny but helpful illustration starting at 3:53 in the video above.

He explains that if Qualanisha has $5,000 in her checking account and $5,000 in her savings account, but she owes Sallie Mae's evil spawn child, Navient, $35,000, does Qualanisha have $10,000?

By now, you know the answer. She's broke. Qualanisha's net worth is -$25,000. And when she spends the $5,000 in her checking on bills, minimum debt payments, food, clothing, and rent, her net worth will be right back at -$30,000.

Get Started

We understand what it's like to live in a fantasy where you have more money than you do in reality. We believe a realistic picture of your financial health enables you to make smart money decisions based on truth.

If the reality of Qualanisha's financial state is shocking to you, it's time to sit down and get an accurate picture of your financial health. Living in a land of financial fiction will not make your money problems disappear. Are you ready to get a realistic picture of your finances so that you can address them? You can figure out where you are in three steps.

  1. Sign up and we'll send you Money Untangled's Net Worth Untangled printable.
  2. Write down all of your assets and liabilities based on the instructions above.
  3. Follow the instructions on the printable to determine your net worth.

You can sign up here.

Make Wise Financial Decisions

You can use your net worth to determine whether you're broke or in good financial health so you can make wise spending decisions. Knowing your net worth positions you to build wealth and eliminate debt.

Ignoring your net worth will allow you to ignorantly make unwise financial decisions which eventually lead to anxiety, stress, insufficient.

After discovering your net worth, you may realize that you're in a healthy place, which could decrease the amount of stress you're carrying regarding money. Or you might discover you're in a financially unhealthy situation, which will encourage you to start addressing the problem immediately.

Regardless of where you are today, you'll find yourself in a better place once you know your net worth. Even if it's polarizing at first, it will encourage you to take action.

Your Net Worth Untangled

A FREE download to help you determine your if you're financially healthy or broke.

Something went wrong. Please check your entries and try again.
22 Shares

About Phillip Holmes

Phillip is a seasoned writer and speaker who has worked with numerous clients to help them take control of their finances. Still digging his way out of debt, Phillip aims to speak and write with conviction, insight, and compassion. He is married to Jasmine and they have a little boy, Wynn.

2 Comments

  1. Melissa Jackson on February 19, 2018 at 9:02 pm

    I see that Navient or owing them is not good. How do I get help or what can I do to get my student loans with another company? I’m a teacher. What are some resources or options?

    • Scilla on February 21, 2018 at 4:27 pm

      Depending on what your husband does for work, he may qualify for PSLF – a loan forgiveness program for the Federal loans he borrowed.

      As an employee of the school district, you may qualify for a loan forgiveness program. are your loans federal loans? You would need to work for a non-profit 501 (c)(3) employer, and make 120 payments (10 years worth of payments) from the time of applying, (also reapply every year). This seems strenuous, but 10 years vs. 30 is a huge amount to have forgiven.

      I have worked for a university, and didn’t realize that my employer qualified until just recently. So maybe you and your husband can look into it.

      Here is more information on the Federal PSLF: https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/teacher

Leave a Comment





This site uses Akismet to reduce spam. Learn how your comment data is processed.