How Much Are You Really Worth?

How Much Are You Really Worth?

When I started my journey to financial freedom, one of the first steps I had to take was to determine my actual financial worth. There is a BIG difference between the money you make (salary) and the money that is sitting in your bank account, compared to your actual financial value.

Have you ever read or heard about Forbes list of the wealthiest individuals in the world? This list includes individuals like Warren Buffet, Jeff Bezos (Amazon), Bill Gates (Microsoft), and Mark Zuckerberg (Facebook). The way they determine this list is NOT by the income these individuals make in a single year; instead, it is determined by their financial value, the value of everything they own vs. what they owe. It is the accumulation of everything they own vs. what they owe. The title they use for an individual’s financial value is Net Worth.

Net Worth

Your net worth is your actual financial value as an individual. How you determine your net worth is a simple math equation:

Assets – Liabilities = Net Worth

Asset

An asset is simply something that you own that has value. Types of assets you may own include:

  • Cash (Checking & Savings Accounts)
  • Retirement Account (401k, 403b, TSP, IRA)
  • Taxable Brokerage Account (stocks, bonds, mutual funds, index funds, ETF’s)
  • Certificate of Deposit (CD)
  • Car
  • Real Estate

Liability

A liability is simply something that you owe money on. Types of liabilities you have may include:

  • Credit Card Debt
  • Student Loan Debt
  • Auto Loan Debt
  • Mortgage

Frugal Money Man Net Worth!?!?!?

I want to be open and up-front with my readers about my own personal finances. After all, I am writing a personal finance blog! If I was a reader of a personal finance blog, I would want to know if the person doing the writing actually knows how to earn, save and invest their money.

My motive for sharing our finances is simple-it is the best way for me to teach you about personal finance. By using my own personal finance as an example, you can see how my strategies work over time. All of my financial gains and losses will be shared with ALL OF YOU. I haven’t divulged yet how I invest Mr. & Mrs. Frugal Money Man’s money entirely, but the greatest part about seeing our finances as an example is that you don’t have to do what we do! You can read and track how our money is being invested and how it grows over time and based off of those results, YOU can make the decision if you would like to follow the same financial path as us. Without further ado, let’s dive into Mr. & Mrs. Frugal Money Man’s finances!!!

I am going to break down how to determine your net worth in a simple table below, based off of our finances.

 

Frugal Money Man Assets

 

Financial Value

 

Frugal Money Man Liabilities

 

Balance

Checking Account

$2,606.36

Credit Card

$6.54

Savings Account

$10,000.44

Student Loan

$0

401(k)

$31,757.37

Car Payment

$0

Roth IRA (FMM)

$11,389.02

Mortgage

$0

Roth IRA (Amber)

$7,749

Taxable Brokerage Account

$100.10

Car Value (Kelly Blue Book)

$9,750

 

TOTAL

 

$73,352.29

 

TOTAL

 

$6.54

Now that we have the complete breakdown of Frugal Money Man’s finances, we can plug the numbers back into the net worth equation.

Assets – Liabilities = Net Worth

$73,352.29 – $6.54 = $73,345.75

There you have it, the Frugal Money Man household’s current financial value is $73,345.75. I included my car in the breakdown to give you the complete breakdown of our net worth. However, I don’t personally calculate my car’s value. So if you remove my car from the equation, our net worth is actually $63,595. I also included some examples in the liabilities column of potential liabilities you may have. This was designed to give you more of a visual representation of how to complete this type of breakdown for yourself.

Personal Capital

personal capitalThere is an amazing financial app that tracks your net worth for you called Personal Capital. I use it personally to track my family’s wealth. You can link all of your bank accounts, retirement accounts and debts, and they will do all the calculations for you. They will also provide you with an extensive amount of visual displays that will help you understand your money better. I HIGHLY RECOMMEND DOWNLOADING THIS APP AND USING IT!

My intention is NOT to boast about the money we currently have. There are A LOT of peers around me that have a significantly higher net worth than we do. There are also peers around me who have a lower net worth than we do. Here is a secret I learned a long time ago that has helped me not compare my financial value to someone else’s…

NO MATTER WHAT, SOMEONE WILL ALWAYS HAVE MORE MONEY THAN YOU

Once you fully understand and accept this, you will never compare your financial value to someone else’s. Your net worth determines ONLY your financial value in the world. There are things that are far more valuable in this world than your net worth. Your family, friends, health, and faith are what truly matter in this world. Don’t ever think that your net worth changes your value as a person. We all make mistakes and we continue to live and learn from those mistakes, and push forward.

How to Improve Your Net Worth?

I believe the most important step to increasing your net worth is actually decreasing the liabilities in your liabilities column. The mentality behind this is simple. PAY OFF YOUR DEBTS, AND STOP ACCUMULATING MORE DEBT. Stop putting everything on your credit card. Stop thinking you need a new car to impress people. Don’t believe that you need multiple degrees that require more student loans, just to get an entry level job. Stop going out to the bar every weekend. Stop eating out every day. Stop buying more clothes and shoes, when you know for DAMN SURE you will still only wear the same outfits that you always wear. When you’re bored, stop surfing on Amazon. Even more simply…

IF YOU HAVE A NEGATIVE NET WORTH, YOU ARE BROKE! BROKE, BROKE, BROKE!!!

If you have a negative net worth, then you simply don’t have the money to afford an extravagant lifestyle. That’s the honest truth. Your 100% focus needs to be on removing all your consumer debt. You will never become wealthy if you continue to spend while you are broke, period. You have to develop tough skin and be okay with telling people “no.” Your finances know they can’t afford all of the requests you get, so you need to also understand this same reality.

Decreasing your liabilities is most important because it is actually giving you a legitimate monthly pay raise! Can you imagine all the extra money you would have if you didn’t have monthly credit card, student loan, or car payments? All of that income that is being wasted on those payments is income that you can’t use to grow your assets. If you begin to remove your liabilities from the equation, you open up more of your paycheck for your assets! Once that income is free to use at your discretion, you can begin to increase your assets in your asset column. Some basic ways of increasing your assets are:

  • Increase your income at your primary job (ask for a raise, obtain certifications, work overtime, show initiative)
  • Get a part time job
  • Increase your savings rate and begin to fund your emergency fund that can last you 3-6 months (This will protect you against life’s curve balls)
  • Increase your contribution rate in your 401k, 403b or TSP
  • Open an IRA and ACTUALLY COMMIT TO FUNDING IT EVERY YEAR

Money is Simple

I can’t stress enough how simple money is. Money is either spent or saved. Focus on decreasing your spending (and liabilities) and increasing your savings, both of which will increase your net worth.

The image you see of wealth on TV is a lie. The majority of those who are wealthy became wealthy because they were frugal with their money for a long period of time, saved their money and then invested that money into assets. They didn’t get caught up in participating in activities that took money out of their wallets. They put all their time and energy into activities that put money into their pockets. They concentrated on building their net worth and the financial value of their families.

Don’t believe me? Go ask Jay-Z about the value of assets vs. liabilities…

jay zI bought every V12 engine / Wish I could take it back to the beginnin’ / I coulda bought a place in Dumbo before it was Dumbo / For like 2 million / That same building today is worth 25 million / Guess how I’m feelin’? Dumbo” – 4:44 Album

Translation – Jay-Z regrets wasting his money on buying expensive cars (liability) instead of using that money to buy real estate (asset). The value of that piece of real estate increased from $2 million to $25 million over time. He wasted his time and money on a liability instead of purchasing an asset that would’ve increased his net worth significantly over time.

The one thing you can never get back is time. Don’t waste your time spending money on liabilities. Spend it on increasing your assets. The more assets you have, the quicker you will achieve financial freedom for you and your family. After all…There has never been a human being in history who regretted having saved a lot of money come retirement…There have been millions who regretted not having any money come retirement.

 

30 thoughts on “How Much Are You Really Worth?

  1. Looks like you are off to a good start. I love that you have $6.54 in liabilities, thats awesome and congrats on being debt free. I look forward to following your journey, best of luck in 2018.

    1. The only reason I threw that $6.54 in there was because it shows in my Personal Capital account hahaha. We always immediately pay off our credit card balances so that there is always a ZERO balance!

      Thanks for reading, and I will be updating and displaying my Net Worth change every month!

  2. The $6.54 balance in your liabilities column made me crack up. Yep, you are definitely a debt veteran! Every debt veteran I know is obsessive about recording debt after the payoff. Had to put 3 bucks on a credit card this month…better record it!

    I’m not debt free, but I do have positive net worth and growing. The higher that net worth creeps, the less obsessed I am about recording and the better I feel.

    When you’re in debt, it’s super important to record and monitor everything. Once the good financial habits are made, the debt is gone, and the finances are in good working order though, you don’t have to worry as much. The tendency toward good behavior becomes natural.

    1. Im glad you liked that:) I make sure my liabilities column is always 0!

      And you’re exactly right! Once you tough it out for awhile and develop the right financial habits, you will worry less and less about your finances because you kmow they are steadily increasing.

      It’s all about developing good financial habits!

  3. You are right. It’s all about how much you keep, not how much you earn.

    BTW – You have a weird thing going on in the Name section of your comment box. I see the contact info for the guy who posted before me. You may want to change that.

  4. What an awesome balance sheet. Having no debt means you are going to sky rocket to wealth. I’m way older and further down that road and already slightly early retired and I highly recommend setting yourself up to where someday you answer to no man. You will of course still have to bow and scrape before your wife.

    1. You are absolutely right! We increasd our net worth by a little over 200% this year solely because we became debt free and invested ALOT of our money. Also helped that the stock market was killer this year:)

      And you are even more right on that…She sets the rules…

      Thanks for stopping by!

  5. Now your dropping J’s lines hitting the sweet spot. Good post, I think it is important to know your net worth.

    This should not be the only focus but it is necessary to know where you stand to know how you can better position your “personal balance sheet”.

    1. The funny thing is after I read a couple of his posts I was like “this dude sounds just like me” haha.

      Thanks for reading!

  6. Great post man! You have the right attitude and have things setup in place for continued success. Keep working to grow that gap between income and expenses and watch your net worth shoot up fast!

    1. Thank you!

      Me and Mrs. Frugal Money Man have BIG plans in place that we will continue to divulge to all my readers!

  7. A liability of $6.54! That’s what I’m talking about. Thanks for sharing your net worth, it’s all about what you have and how you handle it. Keeping an eye on your money constantly will help you increase that net worth and once you hit six figures it will add up exponentially. Keep it up!!

    1. Absolutely!

      Once we began tracking our net worth actively, it became easier and easier to budget, save and invest more of our income.

      Thanks for reading!

  8. Amazing no debt great job! I liked your Jay Z translation thank you lol 🙂 you know who is frugal with their money- I think Lebron James is- I read somewhere he turns off his data on his phone hehe

    1. He really is! Lebron James is a very savvy business man. I actually fully aniticapte him buying and becoming the owner of the Cleveland Cavaliers at some point in the next 15 years!

  9. When I calculate my net worth, I take a conservative approach and assume my vehicles and house is worth $0.00. While technically part of my net worth, I think it’s more motivating not to have these – plus any value associated to them is a rough estimate anyway!

    1. I have a similar mindset of you! One of our long term financial goals is to accumulate $10,000,000 NOT including our home/potential other real estate.

      They will be extra icing on the cake:)

  10. From one frugal millennial to another, thanks for sharing your numbers! I love to see the numbers from some of the more established, “pros” out there in the FI blogosphere, but I am leagues away from them. It’s nice to find someone with numbers I can relate to!

    1. Absolutely!

      Some of the numbers we see out there are very impressive, and we WILL get there soon one day 🙂

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