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If you have been following this series, you might pretty well understand where I am coming from. You see, as I stated in Part 3 of the series, I vow to debunk my father’s saying that is
walay empleyado na nadato” (no employee ever became rich).
I want to reiterate that even if we have an 8 to 5 job, we can still be rich. Even if we are tied to a job every single day and it mostly occupies our entire week, we can still be able to reach that most coveted pedestal. And that this is not only exclusive to individuals who have the luxury of time to establish a business or two. Even without the business arm, we too can be rich.
In Part 3 of the series, we define what is being rich. In the end, it has been exploded that it all depends on your definition. Rich is an end goal. It is your end point. That is why many people would create a dream board and pin pictures of the things they would want to achieve in the near future. Since we come from varied backgrounds and circumstance, we have different definitions of the word rich.
So you already have a definition of what rich is to you.
The next thing to do would be to know where you are. It would be best that you get to understand your current financial status. Think of it this way. When you are planning on a trip, before deciding on the items to wear, you tend to scan your closet first. You do an inventory of your blouses, dresses and the things you deemed essential for that trip. This analogy made me realize that I am indeed a girl. What better way to use this as an example.
This also holds true to our journey to richness. We need to know where we are right now financially.
That is why; many personal finance books would recommend doing a financial audit of one’s life. As they say, if you don’t know where you are, you can’t work efficiently towards becoming wealthy.
Hence, if you are just starting on this, it would be best that you don’t skip this exercise. Perhaps you might ask, where you usually begin. The first thing to know is your personal net worth. Your financial reference point is your current financial net worth.
The net worth formula is:
Personal Net Worth = What I Own – What I Owe
What I own would include your current assets like cash on hand and savings deposits, insurance policy cash value and money market accounts. This will also span your long term assets like investments, stocks, and mutual funds. Your provident funds are also part of your What I Own tab followed by your personal assets like your properties, cars and home furnishings.
What I owe consists of current liabilities and long term liabilities. Your current liabilities include credit card balance and personal loans. For your long term liabilities this would include car loans, house loans and insurance policy loans.
Simply deduct What I Owe from What I Own in order to get your personal net worth.
Knowing your net worth is an important barometer of your financial health. More so this would indicate your capacity to achieve financial goals like buying a home and retirement. If you happen to have a positive net worth, then you can just implement a few tweaks in order to improve it. However, if you happen to get a negative net worth you might want to get out of your liabilities fast and that should be your first priority.
Should your financial situation be messy, it would be ideal to face it. As they say, reality hurts. And we must get hurt in order to improve and to change. This also holds true to our finances. The numbers might be small and more so embarrassing yet this could certainly help in taking positive actions in order to address the situation.
Hence, computer your personal net worth today.
P.S. My very first e-book is finally here. You can buy it using the Buy Now button at the right or via bank deposit. Only Php 150.00. Purchase your copy now.
P.P.S To those doing the 52 Week Money Challenge, it is Week 43 already! Did you deposit the next amount yet?
P.P.P.S Want to know more about investing, savings, stock market and more, check out my reference here. You can download free ebooks and resources too.
P.P.P.P.S I am also sharing my stock market secrets and information via these resources.