In the finance community, everyone is always so wrapped up in tracking their net worth.
Actually, I was too for a bit, but then I realized I didn't care.
Here's why:
Let's start by defining what your net worth is.
According to Investopedia, net worth is the dollar amount of your assets minus all your debts. You can calculate your net worth by subtracting your liabilities (debts) from your assets.
Now, here's where my dilemma comes in. Things that count as "assets" for me, are often things I'd never sell, or at least won't sell for a long, long time.
If I keep them as long as I think, their value will probably be significantly less than what it is today.
For example, I own about $20,000 worth of dirtbikes.
Sure, if needed, I could sell them for cash, but if I have my other finances in order, like having an emergency fund, then I wouldn't need to sell them to raise cash.
YET, these items inflate my net worth by $20,000, since there's no debt associated.
The same goes for my podcast equipment - I have about $6,000-$7,000 wrapped up in podcast equipment. Artificially inflating net worth. Motocross trailer. Artificially inflating net worth. Guns. Tools. Books. TVs. Sporting equipment. All artificially inflating my net worth, and the list goes on.
That's why I don't care about my net worth. Sure, I could calculate my net worth without those items, but then it's not really my net worth anymore, is it?
Without those items, what's left?
Mostly just cash and investments, and THAT is what I care about.
All the best,
Sponsored By
Norwood Energy drills and operates, profitably, oil & gas wells with a 90% success rate. A disciplined and economically-efficient approach provides investors the opportunity to benefit from a lower price point than most industry-level deals.
Hear more about Norwood Energy’s business here, or contact them directly at (817) 600-4246.
Great content Leonard! A good dose of money philosophy to remember what's important and stay on track with our goals is very welcome, especially in times like now!