What Is Your Net Worth?


Money in, money out, a transfer here, automatic debit there. Sometimes we almost need a full time accountant just to keep track on all the comings and the goings of our hard earned dollars. The more accounts and investments you have, the easier it can be for money to float around in the ether. You know you work hard, you haven’t bought a Harley in the past month so you must be getting further ahead right?

Sometimes we can all feel lost in a crowd when it comes to our finances. It is no good guessing that you are on track. One thing I can wholeheartedly encourage everyone to do, if you haven’t already done so is to KNOW YOUR NET WORTH. It is imperative to your financial growth!

It is very hard to aim at something without having measured increments to gauge your progress. Imagine asking your basketball coach about who won the game and getting a response like “You got some in. They got some in. I think you won?”

There is a fabulous saying: What gets measured, gets managed. You know those charity telethons with those humongous goals to raise $10 million for the hospital upgrade? There is always a scale that denotes the amount donated. Why? Because psychologically we are instantly excited and motivated when we see dollar figures ticking over and momentum being gained.

Your savings journey is no different. Know as accurately as possible your net worth. Write it down, monitor it and manage your financial growth. If you drop behind in a month, note down why and take steps to mitigate any future losses.

The calculation of net worth is super simple:
Assets minus Liabilities (Money owing and taxes) = Net Worth

Calculate the values of your assets as a best estimate. Personally, I don’t tend to calculate motor vehicles as they sink like a stone in value over the years (unless it is a historical vehicle).
The way to work out the value of your home and investments is to spend 30 minutes scanning sold properties on the internet. Compare apples with apples. Stocks are easily by checking on the internet too.

You may even find it helpful to calculate 3 prices:
- An ‘I wish’ price
- A ‘Sounds About Right’ price, and a
- ‘No Way’ price.

From that point I would always choose the middle price. The process above might look unnecessary as you could just start with a ‘Sounds Right’ price. The challenge is that we aren’t always quite so objective when it comes to the appraisal of our beloved family home.

Now that you have a plausible valuation, take away any loans and debts. To be even more accurate I like to calculate the tax owing on any potential profits made.

The next step is to write your net worth down on a piece of paper that you won’t lose, a document or a spreadsheet. I use a spreadsheet because I calculate my debts again at end of each month with a fine tooth comb.

Watch your net worth carefully and celebrate each saving milestone that you make. Maybe you can plan a little celebration with your family each time you save an additional thousand. Associate pleasure with saving and you will be guaranteed to form good habits for your financial future.

Today I was reflecting on the famous Bob Dylan song ‘The times they are a changin’ when I was asked to make numerous changes to a new rental property that we have acquired. The building was built in the 1970s and hasn’t been renovated since.

Old tiling that has stood the test of time, solid double brick walls, plasterboard that was more than 10 millimetres thick. Things seem to be made to last, until now that is, where I am requested to modernise the appearance and update the fittings.

One of the alterations that the property manager has advised I change is the hot water unit. It is a 50 litre unit which the plumber estimates will only disperse enough hot water to last a person five minutes. Oddly enough this is an apartment that has been built to house 3 and possibly 4 people. My question is how have the occupants spent the past 45 years showering in the past?

The hot water unit at my house contains around 300 litres. I have worked out that it costs around about $12 a week the heat. We often run out of water as the kids like a morning shower and sometimes an evening bath. When we travelled around the world for 4 months we rented out our house for a year. In our absence the tenants requested a high-flow showerhead to replace the frugal water saving feature. Now the unit gushes out water to whoever can twist a tap.

I remember as a child having a 30 cm television with 4 channels. Now my own children watch a 60 inch unit and have access to 20 or more. I fondly recall our once a year family outing to an All-You-Can-Eat restaurant where each family member felt nauseous because we consumed so much. Maybe you can remember waiting for almost a year or more for a movie to arrive from on video tape?

It amazes me that most family units only 3 or 4 decades ago were content to live in 10 square homes. Nowadays people in Australia and other Western nations aspire to have homes of 25 squares or more. There is no way we would put up with a 50 litre hot water unit in such an establishment. We can no longer stand freeze-dried coffee anymore and need expensive machines to disperse water through freshly roasted beans.

Where am I going with this post you might ask? The title was ‘The times they are a changin’. The above reflections might not be representative of you whatsoever, so please don’t take offence. I think, however, you would agree that you know plenty of people in society where this post paints an accurate portrayal. Possibly it shows the root cause for the bad debt that many have incurred? When I moved into a new home with Hayley as a couple of young twenties, we turned down numerous offers of furniture and white goods as it wouldn’t look modern enough for our tastes. Out came the credit card and in came the lesson it taught us about debt.

Indeed that little hot water unit inspired a lot of thought about how much has changed. We seem to have so much compared to previous generations yet still desire more. We seem to have an insatiable appetite for the latest and the greatest. While we definitely have a higher comparative standard of living, I believe we need to celebrate what we have. There is nothing wrong with investments or acquiring assets, but we all need to remember to show gratitude for the blessings that each of us have.