In this next lesson, we're going to be talking about your net worth. So what is your net worth? What exactly does that mean? So your net worth basically is the value of all of your assets minus the total of all of your liabilities. So basically put put another way, your net worth is what you own minus what you owe. So let's say for example, let's say you are ever involved in a lawsuit, an attorney would want to know what your net worth is because that will give him or her an idea of how much that he or she can possibly get from you if you are found liable by a judge.

So it's important to know what your net worth is, if for no other reason, just for the fact that you want to know personally how much you're worth. If you have children when you pass away What's your net worth? Because that's going to determine how much your children could possibly inherit from you. Okay? Because after you die, you know, your creditors are going to come after what you owe. And they're going to, they're going to get a piece of the action, meaning that if you have, whatever your net worth is, they're going to start digging into your net worth to try to cover whatever your total liability is with them, and then whatever is left over, then of course, your whoever inherits your, your estate is then able to, you know, keep the rest of the money or the assets.

So just knowing how much you're worth is is quite important. So what is the first thing that you want to do when you're trying to determine how much you're worth? Okay, so let's first start by looking at the asset section of the spreadsheet. So the asset section is going to it's going to tell us What you own, everything that you own is going to be on the asset side, the liability side is going to tell us everything that you owe. In other words, who are your creditors? Who do you owe?

So let's start out with a home. So let's say you own a home and you have your home is worth $245,000. So let's start filling these out. So we can sort of, I can sort of give you an idea of what your net worth is going to look like once you input your assets and also your liabilities no not 20 not million. Let's change that to 400 at 245,000. So let's say in your checking account, you have $9,000 so you haven't you have a home and your home is worth $245,000 Okay, you have a checking account.

In that checking account, you have $9,000 you have a savings account in your savings accounts you have 20 $500 Okay, you also have a retirement account. So let's say that you are saving money on a Anytime you get paid, you put money into a retirement account, or you have a retirement account with your employer, you say you have 60 $500. In that account, you have a 401 k with your employer, you also have 60 $500 in that account. Now keep in mind when you are determining how much you is in your retirement accounts, you have to make sure that you Oh, you're only including the amount that is vested. Okay. So, in other words, if you quit your job, let's say when you look at your account, it shows a value of $8,000.

However, you only have $4,000 vested in that accounts meaning that if you quit, or if you if you if you get fired, or if you retire, you can only draw $4,000 and not the entire $8,000. In that case, you want to you want to value your account at $4,000 under the assets section and not value it at 80 $500. Okay, now let's say you have an investment account, so you're still trying to save up for let's say you want to start a business or you want to purchase a home for rental property purposes. So you're saving up to invest in yourself or let's just say just investing in yourself for whatever reason, you have an investment account and in that account you have $1,000 then you have an emergency funds in that account, you have 30 $500 and then you own a vehicle. Okay, so your vehicle is worth 20 $600 Okay.

Okay, so let's see. Oh, no, not 260,020 $626,000 Okay, so based upon this information, what was inputted so far, your total assets are $307,000. Now, let's see how much you owe. What are your liabilities? So your mortgage you owe $250,000 on your mortgage, on your car, your vehicle you owe 24,005 hundred dollars and then you have a Visa card that you have a balance of $950 on you have an American Express card that you have $900 or $900 on and then you have a student loan at this time you owe $16,000 on your student loan and then you have a small personal loan out there for $3,000 Okay. So based upon the information that you included as your asset and based upon the information that you included as liabilities, you have assets of $307,000 and liabilities of $275,000 Okay, which means that your net worth is $31,650 This is how much you are worth.

So if worst case scenario Had to liquidate everything that you have. You will you will have $31,650 in your hand give or take a little bit. Also if say somebody woke somebody was trying to see you. And I know I always use a whole lawsuit thing as an example because it's almost the easiest way to visualize how this works. So if someone is trying to sue you and they look at your assets and your liabilities, they will then see that you you are worth $31,650. So now they know where to begin the entire the entire lawsuit.

Okay, so this is how the net worth tab works. And to just give you a simple, easy visual effect of what your current net worth is, the green line shows your total assets. So the green column shows your total assets of $307,000. And then the pink line shows your liabilities of 275 thousand dollars. Now, if God forbid, the pink line is taller than the green line, that means that you are worth negative something, one or another. So let's do that.

Let's say that your car is let's just assume that you owed let's say $40,000. In credit card bills, that means that your net worth is negative $7,400. Meaning that as you can see the pink line is or the pink column is taller than the green column telling you that your liabilities exceed your assets. Now, this is something you never want to see. You don't want your current net worth to be in the negative. Now it happens, okay, but if that happens to be you, then you want to start the process of trying to figure out how you can start to eliminate debt so that you can Bring your net worth into the positive.

So that is how the net worth tab or rather than net, the net worth worksheet works. So this is what you want to start with before you start filling in any of the other tabs, you want to start with your network to see exactly how much you are worth, it's a good thing to know. And of course, this is going to change over time. So over time, you're going to start owning less and fake car notes, you're going to own less in credit card bills. Hopefully, if your intention is to pay those off, you're going to owe less in student loans. And you're going to also start to pay down your personal loans.

So as you start to do that, you want to come back to the net worth tab and you want to adjust these numbers. In addition, if you are saving money in an investment account if you are saving money in an emergency fund account if you are saving money in a retirement account, and if you will savings account is also increasing, you want to come over here and increase those dollar amounts. So over time, you're going to see a shift in your current net worth, it's going to go up and it's going to go down depending upon what you're trying to do. Now hopefully, your goal is to become financially free, okay? You want to become debt free. So hopefully in the process of doing that, you can come back to this tab and you can start to reduce your liabilities and increase your your assets.

So before I close out this lesson, let's talk about the turquoise column. The turquoise column is a visualization of your net worth. Now whenever this turquoise column is below the zero line, that means that you are in the negative and you don't want that Okay, so the whole idea is for this turquoise turquoise line to be above the zero So let's change this $40,000 back to $950. And as you can see, the turquoise line is now above the zero, meaning that your net worth is greater than zero. Once again, if it is below the zero line, that means that your net worth is less than zero, which puts you in the negative okay?