Time to pull out the calculator and figure out where you stand with your net worth. It’s not a contest, but it is important for you to understand your net worth and why net worth is important. It can impact your ability to make moves that lead to wealth creation and may stop you from getting a loan on that dream home you want for your family. It’s a simple equation, assets minus liabilities equals your net worth. Make this a normal part of managing your finances – you never know, you may already be a millionaire.
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Let’s take a few minutes to talk about Net worth what it is and why it’s so Important [Music] What’s up everyone thank you for Stopping by the achieve financial Coaching channel where we believe in Breaking the chains of debt and talking About all things related to personal Finance my name is kenny simon i am your Personal finance coach and today i want To talk a little bit about net worth you Probably have heard people talk about it Probably heard it in music and rap songs And all sorts of places but today i want To get quickly into the content to Define network and talk about why it’s So important please like the video Subscribe to the channel share this with Some friends check out some of my other Videos as well let’s get started So let’s start this video with a Definition of net worth so we are all on The same page So net worth is the value of assets a Person owns minus the liabilities they Owe Okay So let’s talk a little bit about what Assets and liabilities are to make sure We really understand this definition so Assets are a resource that is owned with The expectation that it will provide a Future benefit so assets are good we
Love assets think houses that grow in Value investments things like that Liabilities on the other hand this is Something that is that is owed to Someone else usually a sum of money that Is settled over time liabilities are bad We don’t like liabilities these are Debts we owe things student loans credit Cards things like that so i’m going to Leave this definition of network at the Top of the page for a second i just want To make sure we’re very clear on this Definition and Now i want to talk a little bit about How you calculate your net worth it’s a Very simple equation it is assets minus Liabilities and that is your net worth So subtracting all the liabilities from All of your assets gives you your net Worth so i just want to point out though Again that those liabilities are taking Away from your network so all the stuff That you buy that depreciates in value Like cars Right is taking away from your net worth Your net worth can also vary depending On the types of assets you have for Example if you have investments or a House you know these things go up and Down in value so at any given moment Your net worth can fluctuate so your net Worth from day to day and year to year Changes hopefully it’s going up over the Long haul but it will fluctuate but
Still i say having assets that will Trend up is always a better look So let’s talk a little bit about why net Worth is important okay real quick Couple of things trying to keep this Pretty straightforward your net worth Gives a clue to your overall financial Health right i know some people you know Want to equate net worth with value That’s not what we’re talking about here In terms of your value as a human being That’s never in question your value as a Human being is always um off the charts You know no matter what your financial Situation is but your net worth gives a Clue to your overall financial health And it gives a clue to your overall State of wealth and we’ll touch a little Bit on wealth later in this Video so net worth can be described as Positive or negative you don’t want a Negative net worth a negative net worth Means you have more liabilities or debts Than you have assets so translation It can be translated many ways but You’re living above your means or you Have too much debt or you’re over Leveraged you hear that fancy word by The talking heads they like to say Leverage that just means debt positive Net worth means your assets are more Than your liabilities and if your net Worth is one million congratulations you Are a millionaire okay let’s do a simple
Example because i really want you to Understand this thoroughly since your Net worth does equal wealth okay let’s Say we have a house the house is worth Two hundred thousand dollars but you Have a mortgage balance you’re still Paying on it and the mortgage balance is A hundred and fifty thousand dollars so That gives you fifty thousand dollars to The positive so far so good you’re 50k To the positive by the way if you have a Business you can count that into your Net worth as well um okay let’s move on 401k or retirement plan you have a Hundred thousand dollars in that that’s Great that is definitely an asset it Will grow over time right now it’s worth 100 um thousand dollars so so far so Good and you have a savings account that Has three thousand dollars in it so That’s an additional three thousand Dollars of assets something that is Definitely good something that will grow Now let’s talk about some things that Sort of hurt your net worth you have a Student loan of 35 000 The average student loan Debt is somewhere between 32 35 000 so I’ll just use that number um that is Counting against our net worth then you Have credit card debt let’s say all your Credit card debt adds up to 15 000 That is definitely counting against our Net worth and then let’s say we have a
Car which they’re always interesting Some people think cars are assets i Don’t even count my car when i calculate My net worth because They depreciate in value until they’re Worth zero so i don’t even count my car But in this example we will use it The typical typical example is uh Something like this you have a car it’s Worth five thousand dollars but the loan You have on it is ten thousand dollars Right so you actually owe more than the Car is worth so you have a negative five Thousand dollars of equity you’re upside Down in the car right so when you add up All of the things all of the assets that Have positive value that total number is 153 000 right Not too bad now you subtract the things That have negative value or your Liabilities whether it’s mortgage Payments that you owe whether it’s your Upside down on a car you’re still paying On but your total liabilities are 55 000 So when you do the math your total net Worth ends up being 98 000 Now this is if this is your situation or Is very close to these numbers let me Show you how you stack up against the Rest of the us when it comes to network So the federal reserve collects data on Net worth across the u.s every few years Like every three years they do this Survey they call the survey of consumer
Finances right the last one was done in 2019 and i wanted to use those numbers So i went to financebuzz.com and they Had a lot of good information that they Pulled from the federal reserve’s 2019 Survey so let’s talk about some stats Using That number this information from 2019 All right so We’ll mention the average here but I just want to say the average really Doesn’t tell a story when you’re looking At stats right the number that i really Like to look at is the median or the Middle number so if you were to put all The networks on a spectrum from smallest To largest highest to lowest whatever That number that’s in the middle is what Really tells the story so i just want to Put a few us-based stats out there Remember all these stats are from 2019 Prior to the pandemic so this could be Better if you had a house that soared in Value or worse if you had issues with a Job or things like that so the average Net worth in the us is seven hundred and Forty eight thousand dollars sounds Great right The median net worth Is a hundred and twenty one thousand Dollars you see how the average can tell A different story it’s a bit misleading Because those with super high net worths Make the average seem higher median puts
Us right down the middle meaning half of The population is higher than this Number and half is lower there are also Many ways to cut up this data you can Cut up data network data by region by Marital status by educational level by Race Whether you rent versus whether you own And i believe it’s important for us to Face facts and understand um what net Worth can tell you about wealth Distribution and so i want to talk a Little bit about that now don’t be upset With me I didn’t make up the numbers i’m about To mention or the chart that i will show Here in a second i want you to use it as Motivation to work on your own personal Network no matter where you fall on any Spectrum so listen four-year college Degree holders have a median net worth That is four times higher Than um that of someone with only a high School diploma i said high school Diploma i’m going to actually do a video On on whether or not college is worth it If you go and get something like you you Know you’re an electrician or something Like that Um but i i wanted to point out here Though that Four-year college Versus that someone with a high school Diploma
Four times the net worth okay Four times the median net worth by the Way all right here’s a good one The top 10 of households in the us Own 76 Of all wealth while the bottom 50 Percent own Just one percent yep let that marinate So this chart i’m about to show i lifted This straight from the financebuzz.com Um website again they created this from The 2019 survey of consumer finance Conducted by the federal reserve so take A look i want you to hit the pause Button and check out these specifics Regarding net worth by race again don’t Shoot the messenger i didn’t create These numbers and these are numbers that Were actually um have been consistent Over time but you can see where they sit Now in 2019. Okay so how do you improve your net Worth few quick things the first two are More about your overall mindset i’m big On that um and the others are more Practical recommendations and things That you’ve actually heard me say before First mindset thing you have to start Buying things that increase in value Over time and a lot of cars isn’t one of Those right i’m talking houses Investments things like that the second One is this is a big mindset in the us Because we are we love to spend money
And buy things um and a lot of us have Gotten used to debt but we have to stop Making excuses about why debt is good And how you are going to leverage debt To get ahead get rid of your debt debt Is not your friend all right last few Things don’t keep up with the joneses You need to live below your means and a Budget will help you do that you have to Track your money or you will never know Where it went The next make a plan for your debt stop Ignoring the student loan debts and Saying things like i’ll have this Student loan forever make a plan to Tackle it refinance those loans if you Have to but you need to be making plans To eliminate your debt and then you need To learn how to invest there is a lot of Information out about the basics of Investing it’s much easier to learn These things than it was before so a Good place to start investing is in your Own retirement plan at your job and then Last certainly not least take home Purchasing seriously this isn’t Something you do without planning right And don’t buy too much house so if your Credit is jacked up don’t buy a house Until your credit is good you know um or You pay for that with subpar financing Option you’ll have bad you know bad Options in terms of how you finance this House that will put you further into
Trouble you need to save a healthy down Payment no money down is not a good look You know you don’t you don’t want to put Yourself upside down before you could Even make the first payment by putting No money down or having to pay pmi or Private mortgage insurance if you can’t Save 20 to 25 percent for a down payment You are looking at too much house or you Need to make changes in how you handle Your money so you can save that but work On these things and watch your net worth Skyrocket so that’s it i don’t have much More to add other than the content that I just shared i hope it gives you some Food for thought as i always like to say Listen we need to make decisions with Our money that improve our odds of Building wealth and having and owning Something you will never be able to make Decisions for yourself on how you spend Your time or how you live if you’re not Accumulating wealth if you aren’t doing The right things with your money and Ultimately you want to be able to make Your own decisions about how you live Your life and money is a big part of That it isn’t everything but it’s a big Part of that let’s start doing things That will help you build your net worth Invest in things that grow in value not Necessarily in things that go down in Value i’ll always be a person that loves Cars but if i’m spending more on my cars
Then i am investing in my future and Investing in my retirement i think i got Things a little bit twisted remember This you can achieve much greater things Than where you are today if you’re Willing to put in the work conceive it Believe it and achieve it i’ll see you On the next video