Before I first started my journey in real estate investing, I had no idea what “net worth” even was, let alone how to go about calculating my own. Now, that I have gained some experience, I get asked all the time from my students: “How do I figure out my net?”
If you are asking the same question, you came to the right place.
WHAT IS NET WORTH?
Your net worth is simply what you own minus what you owe.
For a company, this is called shareholders’ preference and may be referred to as book value.
In personal finance, net worth refers to an individual’s net economic position. Similarly, it uses the value of all assets (long-term assets) minus the value of all liabilities.
KNOW YOUR NET WORTH
Your Net Worth is not your bank account balance.
Maybe you just thought: “Yes! I got a bonus today!” Unfortunately, it’s not truly a bonus until all of your liabilities and debt are paid.
Before I became a real estate investor, I had a ton of liabilities. I decided to never have debt again. After that decision, my net worth began to increase.
GET GOOD NET WORTH
How did I get out of debt and stay there?
I followed one simple rule: If I can’t pay cash for it, I don’t buy it.
Debt is destroying people, and I’m not going to let it destroy me or any of my students. First thing you need do is calculate your net worth.
How to calculate your Net Worth:
- Take a sheet of paper and draw a t-Bar
- On one side, write “total debts.” Your total debts is everything you owe.
- On the other side write “income streams.” Income streams is all revenue you have coming in.
- Then, subtract total debts from Income streams and that will equal your total net worth.
Calculating your net worth seems confusing, but it’s really that simple. Come up with a game plan and stick to it! If I can do it, so can you.
Take care, comb your hair!
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PPS: Before I let you go, I wanted to give you my eBook! Download it here!