Wednesday, February 8, 2012

WW: Net Worth

Welcome to Word Wednesday. The word of the week (which is really two words) is Net Worth.

Now that we've discussed what Money is, the differences between Rich and Wealthy and what Assets and Liabilities are, these all come together to make up Net Worth. Your Net Worth is basically the sum of your Assets less your Liabilities. However, the definition of Assets and Liabilities can make a huge difference in what you think your Net Worth is.

The Banker's definition of Net Worth would be to add up everything you could sell (for what you could sell it for), add in your cash and subtract your debts. So add up the value of your home, cars, boats, golf clubs, furniture, etc. plus your bank accounts and then subtract the total of your debts. While for many people this number is not comforting (many people are upside down, which is to say they owe more than they could possibly pay), it is more comforting that the Kiyosakian Net Worth.

Robert Kiyosaki, in his book Rich Dad, Poor Dad, states that Assets pay you and you pay Liabilities. When you use those definitions to determine your Net Worth, you get a better picture of where you actually are financially. Another way to look at it is that Bankers look at a Richness Net Worth while the Kiyosakian view looks at Wealthness Net Worth. Rich is temporary. Wealth is lasting.

Your net worth to the world is usually determined by what remains after your bad habits are subtracted from your good ones. 
Benjamin Franklin 

net worth


net worth


net assets


net assets

the total assets of a business minus its total liabilities.
Also called net worth.

No comments:

Post a Comment