We are diving into the topic of net worth this month for the monthly wealth chat! Understanding your net worth is an important step in building generational wealth for your family. People talk a lot about the pay gap, but what is even bigger, especially for African-American families, is the wealth gap. This is something we are focused heavily on and net worth is a topic that is discussed frequently in our home.
Here is an easy to understand definition of net worth from Investopedia: An individual’s net worth is simply the value that is left after subtracting liabilities from assets. Examples of liabilities, otherwise known as debt, include mortgages, credit card balances, student loans, and car loans (or anything that you are liable to pay back).
Assets in simple terms are things that you own. We have focused heavily throughout our marriage on the importance of generating assets and minimizing debt because ASSETS – LIABILITIES = Your net worth. No one can take away my assets unless I sell them because they are mine.
So, Why does Net Worth matter?
Understanding, building and protecting your net worth is all about having a solid financial future for yourself and your loved ones. Building generational wealth allows you and your family to live more freely and less reliant upon “the man” for opportunities, money, etc. Nearly all of our net income throughout the years has been used to invest, acquire assets and make more money. Yes we travel, shop and enjoy life (more so now than in years past), but the majority of what we spend our money on is income generating assets.
We are also very competitive with ourselves, and something we started doing years ago was pushing ourselves to be in the top 1% for our age group when it comes to net worth. We use this calculator, which pulls data from the latest census, to check where we stand. We also use it to plan ahead for years to come and to understand where we need to be aiming for in each phase of life. For example, in order to be in the top 1% for age 40, we need $6M, and so that is the next target that we will hit before turning 40. We’re speaking it into existence over here! Okurrr!?
Where Do I Start?
The best first step is to list out your assets vs. your liabilities. It is SO important to understand where your money is going. If you feel like you make good money, you have a good job, but at the end of the month things are tight and you can’t wait to get paid again, it’s time to take a closer look at where your money is going.
Jason discussed this in one of his early podcast episodes. I’m linking the discussion here because knowing where your money is going and understanding what you own vs. what you owe is a basic practice that can save you hundreds, if not thousands a month.
Am I Too Late?
The short answer is no. You’re never too late, but you have to be disciplined in order to make significant financial strides. I asked Jason what he would say to this question and his response was “if you’re worried about if you’re too late, you’re focused on what other people have. You have to run your own race.”
The average person is not willing to live uncomfortably now or for a period of time so that they can live however they want in the future. There’s nothing wrong with living in the moment, buying what you want and enjoying life’s luxuries, but if your financial goals are hefty, your actions have to align with your goals.
How Do I Become A Millionaire?
- Understand where your money is going
- Live below your means
- Create passive income
- Make sure you are investing
- Take risks
Take some time to work through your net worth calculations and then set some goals for where you want to be in a year, 5 years or 10+ years. You have to visualize where you want to go and really do the work to get there. Anything is possible. We were two broke college kids when we got married, but we both have always had vision. Jason’s a bit better at the execution than I am, but I’m really proud of the journey we are on together.
It’s not about the money, it’s about freedom.
You can check out my previous wealth chats on the blog linked here: The Monthly Wealth Chat. Thank you for reading!