Financial tip of the day.com - FREEDOM THROUGH FINANCE
Social Sites
  • Financial Tip Of The Day
  • Books
  • Websites
  • Contact Us
  • Disclosure

NET WORTH STATEMENT

17/3/2014

0 Comments

 
Picture
After reading the book Rich Dad Prophecy by Robert Kiyosaki, I've decided to post changes to my net worth each month in addition to the BHAG updates.  He makes a great point in the book that you can't effectively change your financial situation if you're not seeing the problems arise on a monthly basis.  This initial post will show you how to set up your own... 

A person's net worth is calculated the same way that a business's balance sheet is calculated.  A - L = OE or simply ALOE. 
A = Assets
L = Liabilities
OE = Owner's Equity

The individual looks different, but is very similar.  A - L = NW
A = Assets (not including house)
L = Liabilities 
NW = Net Worth

Assets not including your home is a big point of contention with people.  I completely disagreed with Robert on this, but now I agree with him to a certain extent.  Your home should not be counted as an asset unless it generates cash flow for you.  Which means that you're running a business out it, you receive rent, brewing meth in the basement, or maybe you're able to grow crops on the land.  Doesn't matter as long as it's generating cash! 

So once you take all of your assets (retirement plans, businesses, bank accounts, etc.), you then must take away any sort of liabilties that you have (mortgages, personal loans, student loans, auto loans, etc.), and the resulting number is your net worth.  However that final number changes each month is going to be my change in net worth.  

For a glimpse at somebody who already does this and actually bares his numerical soul, check out this website http://www.milliondollarjourney.com/category/net-worth-updates

-CC
0 Comments



Leave a Reply.

    Author

    This website was created due to the atrociously misguided financial advice that I've heard over the decades.  Financial freedom is not intellectually strenuous, but it takes discipline. 

    RSS Feed

    Categories

    All
    BHAG UPDATE
    College Savings
    College Savings
    Credit
    Economics
    Estate Planning
    Estate Planning
    Financial Planning
    Financial Planning
    Insurance
    Investing
    INVESTMENT JOURNAL
    Mistakes
    Net Worth Update
    Retirement
    Tax
    Thrift

    Archives

    August 2017
    May 2017
    April 2017
    February 2017
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    October 2015
    September 2015
    August 2015
    July 2015
    June 2015
    May 2015
    April 2015
    March 2015
    February 2015
    January 2015
    December 2014
    November 2014
    October 2014
    September 2014
    August 2014
    July 2014
    June 2014
    May 2014
    April 2014
    March 2014
    February 2014
    January 2014
    December 2013
    November 2013
    October 2013
    September 2013
    August 2013
    July 2013
    January 2011

Powered by Create your own unique website with customizable templates.