If anyone asked you how much you earn on a monthly basis, you would give an answer to that question in a jiffy, probably even down to the last kobo (currency in Nigeria).
However, if you get the question, ‘What’s your net-worth‘? You would probably give a different response such as ”Err…I am not too sure about that.”
Like I always say in the green club, calculating your net-worth is not just an activity for those on the Forbes list.
It is an activity for anyone who wants to make better life decisions and leave a legacy.
I never used to think in terms of net-worth. I actually thought it was vain to think that way.
I also felt I would just be counting kobos and not the billions, so what was the point?
But that was until I learnt that my net-worth is a measure of my financial health.
That gave me a paradigm shift
I realized I shouldn’t calculate my net-worth to get a bloated feeling about myself. That was vain.
I should calculate my net worth to get a snapshot of my financial health.
It’s the same way Doctors advise us to go for regular health check ups.
You shouldn’t wait till you get the symptoms of an illness before you do a health check.
Doctors advise you do a health check, at minimum, on an annual basis. These regular health checks keep you in check and provide a basis to judge the merits of your lifestyle habits.
So ,why calculate your net-worth?
Calculate your net-worth to get a picture of your financial health. When you calculate your net-worth, you will see the result of everything you’ve earned and how you’ve spent it over time.
It will provide a wake-up call if you’re not on track or need to make a shift
or encourage you if you’re on track. Remember, it’s you vs. you, not you vs. anybody else.
How do you calculate your net-worth?
Your net-worth is the difference between your assets and liabilities. In simple terms, it is the difference between what you own and what you owe.
If your assets exceed your liabilities, you have a positive net-worth. If your liabilities exceed your assets, you have a negative net-worth.
How to increase your net-worth?
There are 4 major steps to increase your net-worth. This applies to you if you have a positive or negative net-worth. The following 4 steps are the major triggers for an improved net-worth;
Step 1: Review your assets
An asset is anything of value that can be converted into cash. Examples include real estate, cash, stock etc. Review your assets to know if they are valued correctly and put down a value for each asset.
Please note that personal items such as your car or jewelry might not count as assets. Some experts advice you calculate your net-worth less personal assets as well to get a true picture of your financial health.
The key question to ask at this point is ‘how can I increase your assets?’
Step 2: Review your liabilities
A liability is a debt or an obligation you owe. Examples include loans; mortgage loans, student loans, credit card loans etc.
Review your liabilities to see where you can work on reducing your liabilities. A lot of people keep working to service liabilities i.e. pay off loans without really growing the asset base. Be careful you don’t get carried away with living with debt.
The key question to ask at this point is ‘how can I reduce or keep my liabilities in check?’
Step 3: Invest in income-generating assets
Beyond simple investing, you’re better off investing in income generating assets to help you build your net-worth. While any asset can help you boost your financial health, there are assets that are more likely to have a better effect on your bottom line.
Some great examples include investing in the financial markets or real estate. These assets can increase your bottom line once you get started.
The key question to ask at this point is ‘What do I invest in that works best to improve my current bottom line?’
Step 4:Check your free lunches
You’ve probably heard this before. Yes, there’s no such thing as a free lunch and there are definitely no free lunches with investing.
When you start investing, there will be most likely be fees to pay your stock broker, asset manager or investment bank in return for services rendered to you. Don’t be afraid to ask what the charges are so they don’t eventually eat into your precious portfolio.
Learning how to calculate your net-worth is our first lesson in the green club.
That’s because knowing your current financial health is always a great place to make a diagnosis before you start making further investment decisions.
Once we know the state of your financial health, we go further to ensure you learn the pros and cons of multiple asset classes and how they help you improve your bottom line
Great thing is the the green club is now open to new members, sign up to take advantage of the early bird discount before it expires.
Trust me when I say I wish I had access to all the information we share in the green club when I started my investment journey.
We are building a community of well-informed investors who are confident about their investment decisions.
Stop waiting on the sidelines.
Get into the real marathon when you click here to join the green club today
Remember, the (financial) decisions you make today won’t have a big impact on your life tomorrow. Or the next day. But in ten years, they will.
So take advantage of this time.