You Must Be Able to Measure Both
Net Worth
About 10 years ago, I read the book Secrets of the Millionaire Mind, by T Harv Eker and this was the beginning of my financial education. It opened my eyes to what I was lacking in thought regarding money and confidence handling money. I signed up for T Harve’s Peak Potential Weekend seminar and I haven’t looked back. I began measuring Financial Net Worth and Internal Net Worth almost immediately.
In that weekend, I learned to start questioning how I looked at money and people who had money. I am not the groupie type, but I enjoyed the weekend seminar and used this weekend as a starting point that allowed me to open my mind. I started reading anything and everything that helped me grow. I went to seminars, basically anything that would help me learn more about money, business and self improvement. I eventually found mentors, I learned how to invest, and I now have fun testing myself.
How I Changed My Thoughts about Money
My eyes were opened to how I talked about people who had money, this was my programming from growing up with very little. Before the 2009 financial collapse, I had property, and had a 401K that I really didn’t understand, I picked some funds, but I didn’t know what I was choosing. I had a great career that I was moving up in and I was earning a 6 figure salary, but I had no idea how to keep it. I only saw my accounts get larger, I didn’t know what to do when everything collapsed.
I had heard about the idea of Financial Net Worth but never applied it to my situation until I attended my first seminar. I received a hand out of a spreadsheet for calculating out my net worth, I filled it out and sadly I had a negative net worth. I had some real work to do. My internal net worth (we will discuss later) needed some work as well my, my eyes were now open. With hard work, I have not been negative since, my net worth has grown by buying a few properties, saving a great deal of money and managing the small amount of debt I do carry carefully.
At first, I kept a written spreadsheet which I updated monthly and I still remember the day when the net worth number was positive and growing.
I now measure my financial wealth with a app called Personal Capital. I check this app every day. Its free and has great tools. I have entered my credit cards on there and I can see what I has been charged, this also helps me catch any fraudulent activity. I also have used the Mint app in the past, but prefer the Personal Capital app now. I love creating a game out of it! My game is to keep the money I make, and grow the funds so to have the money to invest.
What Do I Do Now?
In most cases Net Worth is fairly simple to figure out.
Make a list all of your assets
Market Value of your home
Market Value of your vehicles
Money in Investments accounts, 401K’s, Roth IRA’s, Insurance
Amount in checking and savings accounts
Any personal items of value, art, jewelry, collectibles
Next…
Make a list all of your liabilities
Mortgage of your home
Loan balances of vehicles
Balances of credit cards
Student loans
Medical Bills
Back taxes
Any Liens or judgments
Calculating Your Net Worth
Assets (example)
Home Value: $300,000
Value Vehicle: $30,000
401K: $10,000
Savings: $500
Checking: $1000
Total Assets = $341,500
Liabilities (example)
Mortgage for Home: $260,000
Vehicle Loan: $25,000
Credit card Balances: $25,000
Student Loans: $40,000
Total Liabilities = $350,000
Assets – Liabilities = Net Worth
$341,500-$350,000=$-8,500
The net worth in this example is negative, because this person owes $8,500 more when they have in assets.
Figuring out your financial net worth is important to your financial health. The sooner you figure this out the better, because it is your snapshot of your finances and your opportunity to take control.
Financial Net Worth is easy to figure out, whether you have $100 or $1,000,000, its all the same
Once you get to this step its all about forward movement from the original 7 steps
How Do I Improve my Net Worth?
In the example above, this person is carrying a lot of debt. Knowing where you stand by using the cash flow example in part 1 will help to see what funds are available to pay down the debt totals.
What are your short term and long term goals to pay off? If your student loans are low interest, pay the credit cards down first?
What can you do to make side money to pay things down? Now comes the moment you start to think about the future. How do you become debt free?
Financial Net Worth and Internal Net Worth
Now, here is the hard part….In order to feel good about your financial net worth, you must work out your Internal Net Worth.
What is Internal Net Worth? It’s how you feel about yourself, how you feel will directly affect how you handle your finances. You have to let go of your negative voices about yourself and money. If you can ask for help, you are on the right track.
As a coach, I am an accountability partner, not a friend or family member, so I can be very frank about my client’s situation. There are times when I try to set up a face to face to see a clients progress, and they will become defensive about their choices. That defensiveness is a result of not being able to control what they are doing, and low self esteem. It’s the excuses we tell ourselves that holds us back, for whatever reason. “I work hard so I deserve this ____!”, and that’s ok, when you have 0 debt, it’s not ok when you carry a heavy credit load. There is a reason you are here.
Your window Sticker – Your Internal Net Worth
What does you window sticker say? What are you worth?
I stumbled upon this subject while listening to a podcast, I was on my own journey so I really took this to heart. If I was to list all of my personal stuff, good or bad, about myself, then put a value on how potential dating partners might look my window sticker. Would they value me low or high?
How do I talk to others? Do I get defensive or do I keep calm? Do I keep my word?
The really great thing about this exercise, I had a list that I was able to follow and do the work needed
Here are some clues to a healthy window sticker – High Internal net worth
- We set healthy boundaries with people in our lives and spending
- We make healthy decisions, we feel and measure our decisions
- We do not show off, we are careful about how we spend
- We accept responsibility when we make mistakes
- We choose wisely. We can ask other opinions, but we make the decision
The window sticker is not about the physical, others can see physical. Others can see also when you are not being truthful with yourself. Doing the internal work is just as important as the financial work, try to do both at the same time. Try to figure out why you are making the decisions you are making with money. Your Financial Net Worth is tied to your Internal Net Worth. Once you see the connection of Financial and Internal Net Worth , your life will be changed forever.
You need to see yourself as successful to be successful.