Why Net Worth is an important number?
Do you know your net worth? Most people do not. A strong viking would know how many cows and gold coins he or she owned! Otherwise they would not be able to manage and survive a harsh environment, and the same goes for us! I think it is important for a couple of reasons. This one number can sum up your ability to create security for your family. It can determine your ability to live the life you dream of. Before I go into the reasons, pour yourself a glass of wine and grab a pencil and paper. Add up the value of all your assets (real estate, savings, investment accounts, bonds, collectibles, fair market value of your car, etc.). Next, subtract all your liabilities (mortgages, school loans, consumer credit card loans, car loans, etc.) = Your Net Worth. I use a word document. Some people use excel spreadsheets or a form from the internet, whatever you use figure this number out.
Average net worth by age:
Are you a slave to someone else’s dreams?
Now you may need more wine! Is the number negative? If so, you may want to take action to climb out of debt. You are funding someone else’s dreams, travel, experiences, home and security at the expense of your own family’s future. In the US you are probably in good shape if your number is a big fat ZERO. If your number is zero, congratulation, you can start building to a better future. If it is negative, do not worry, follow The Money Vikings for hundreds of ideas you can deploy each day to attack and destroy debt and build your net worth.
Isn’t it fun to track the progression of different things? Tracking sports figures, numbers, our fitness goals, etc. There seems to be a pleasure in making progress and evolving into something stronger, better, different. Tracking your net worth each year can give you a sense of moving forward and progressing, a strong psychological factor that can spur more growth and motivation.
Your financial health and dreams
Achieving a solid net worth and increasing each year can be a good indication of healthy financial habits. I don’t know about you, but the years seem to clip on by pretty fast. Isn’t it time to get serious and make progress? For you, for the ones you love, for your kids. I like to dream about options for my family. For example, you may hit a certain net worth and perhaps you could move to a lower cost of living area or another country and live for a long time. Even if you do not do this, it is nice to have options and fantasize.
The bottom line is literally you want to know your bottom line. It could change your behavior, your view and ultimately your life for the better. Knowing the number can help motivate you to do better than yourself from last year and the years before. That is the only person you are in true competition with is you, being the best you can be each day.