Know Your Value

We’re about to get real uncomfortable. Assuming you are uncomfortable with facing your current financial situation down to the digital pennies in your bank account.

Grab your coffee, pens and paper. Today, we need to sit down for the run down.

I’m assuming you already have your computer, since you are reading this – but hey, you could be mobile. Excel spreadsheets will work for this exercise too, excuse me for being old fashioned at 25.

The last few blog posts have been more introspective, taking a look into you as a person and what makes you tick. Maybe some of you are working on making some changes based off the last posts, and maybe you aren’t.

But if you’re reading this, it means you want to make a change to your financial situation, and that’s all I’m looking to help do.

We need to get real and raw about your finances, and so we need you to open and view that paycheck slip, those bills you pay and your online banking statements because we’re looking at net worth. I was curious, and tried to Google how many Canadian’s don’t know their net worth – and there was nothing I could find online. I wondered if that’s a question that anyone has bothered to ask before, as the rate of debt is somehow rising at the same time as the average net worth (mostly due to the current real estate market, sorry millennials, many of us aren’t that lucky)*. So we need to be smarter about what we’re doing with out money. It also occurred to me, it might be the case that many Canadians and fellow millennial don’t even know what net worth is ! Or why is net worth important ? All I care about is the paycheck I get from my employer.

Well, I used to only care about that paycheck too… the issue is, that paycheck is one factor in your overall finances. If you’re making a lot of money, great ! Honestly, good for you. You could have the highest paying job of all of your friend group (more on that topic later) but if you aren’t aware of your financial standing, if you don’t know how your income is coming in compared to debt, life expenses, etc. the rug might come right out from under your feet.

To be clear – I just care about ensuring you are on the right path to becoming rich, financially free, out of debt – whatever it is you want.

But, just to double check though – you may not be as ahead as you’d like to think you are. (Or maybe you are, maybe you know your finances better than I do, but hey – this article is to help people who don’t). So prove me wrong and do this exercise anyway.

So what is net worth anyway ? Net worth is a combination of two things. Simple grade 3 math ? (It’s been a long time since I’ve been in elementary school, maybe kids are smarter than me and it’s done in Grade 1).

To get your total net worth, you need to add up all of your nice fancy or not so fancy assets and put all of those numbers together to show the nice big wad of cash you would get if you sold everything (aka liquidating your assets). WOO. I’m rich. If only that was all that net worth was. I don’t want you looking down to the bare bones of  your close and clothes that you own or the extra gift card you have laying around somewhere. Look at the bigger things, your cars, your house or condo, any type of investments you have, your RRSP’s, what’s in your actual bank account. All of those things that you have lined up, add that number together, even if it’s a rough estimate for your house or car, try and get to a number you think is as close to right as possible without actually selling your stuff.

Great, that seems positive! Now we need to do the same thing, except, well, for your debt.

Well this is less fun.

When it comes to debt, the only way to get through it is, well through it. You’re really not getting out of it without paying attention to it so we have no choice but to pay attention now. We’re going to add up those ugly numbers that give you stress to see where exactly you’re at. Things like student loans, car loans, mortgages, credit card balances, lines of credits… ya, alllllllllll of thoseeeee.

Now go away and come back when you’ve got those two numbers for me.

Did you double check them ?

Yes?

Okay, good. Now we need to subtract your not so nice number (debt), from your nice number (assets).

Net Worth = Assets – Debt

Now that we have that number, what do we do with it ? Well. Two things, your number is either positive (yay!) or negative. Not so yay. But we needed to see this number, written in pen or in your nice excel spreadsheet to really see it.

Has that number sunk in yet? Good. Now we can only go up from here, and I want to help you do that.

There are two things I want you to do, one I will explain now, the other will come in an upcoming article. I think you’ve done enough for this blog post, so it’s simple what you need to do next before we tackle it.

Track your net income. No matter what your number is right now, I want you to write it somewhere so in three months you can look at it again. Every quarter we are going to go back, and do this whole process again because that will lead us to work on your debt. It will be encouraging to see the changes that have been made in only three months, it will help you see results and get you motivated.

That is if you start working towards it. You can’t just do this exercise and then believe that it’s going to happen. You need to take action. So this is Step 1, to start know your value.

Or Step 3 if you’ve read my other two blog posts !

Did you store your net worth somewhere you’ll remember ?

KB.

 

*https://www.ctvnews.ca/business/net-worth-rising-but-higher-debt-stings-canadian-consumers-analysis-1.4097092

Rich with Fancy Cars?

Which would you rather, look rich or be rich? The obvious answer, be rich, right?

How many times have you passed a lambo or BMW and thought dang that person must be riiiiiichhhh. I want their life.

Or done that with those million dollar homes in gated neighbourhoods ? Maybe spent a little too much time on MLS only to begin questioning how there are houses available for 7 million dollars not 20 minutes from where you work…

Don’t we all.

The thing is, we need to re-evaluate what it actually means to be wealthy. Does wealth mean driving the fanciest cars, having the biggest house in the neighbourhood, constantly updating your wardrobe with the latest trends ? Technically, by definition yes… and this is what is sabotaging us.

What we should be focusing on is the abundant possession of money not things. Not because money is everything, but because money will help you get to where you want to be. It also is what will continue to make the world go round, not your 2018 BMW that’s already depreciated by at least a third of its value. (I know, I’ve made this mistake too – though not a BMW – and I still love my SUV so 20 years, here I come).

Often times, those people that you see driving around in fancy cars or who have the biggest houses aren’t actually rich at all. The one’s that you’re dreaming to be, they are wishing they were too because they are just playing the part. (Although not always, there are some really rich people in the world). Often though, the everyday people driving those fancy cars also have the huge houses too, and of course they need the backyards with the pools, the sixty thousand dollar kitchen reno, and the three hundred dollar Tiffany bowl just to keep up the appearance. How do all of those people make those ends meet? The answer, not all of them do. People get themselves in situations they can’t crawl out of because of the attention we put on things. So people buy, buy, buy. Even when they can’t afford it.

We all want to look rich and that is exactly what is keeping us from actually becoming rich! What a shocker.

It’s an issue within ourselves – we associate wealth with the latest gadgets and trinkets when these types of items (yes that BMW you’re dying to have every time you drive by it) we buy and are knowingly putting ourselves into debt!  Why do we do this!? It is almost impulsive. It is so engraved into our brains that this is what success is when it’s not! It’s proven that material things will not make you happy. Yet we keep doing it. We associate fancy things with success – the accomplishment of an aim or purpose – but ‘owning’ fancy things isn’t success. I say owning with quotations because you don’t own what you haven’t paid for. Sorry, that should be no surprise. And it isn’t happiness. So what is it? It’s a waste of your money, it’s not success. Learn to live below your means, and your life will be much more fulfilling than stressing to make ends meet. That’s another blog though.

To be successful and accomplished, that’s a feeling that lasts.

I encourage you to think about what success means to you. Do you find you’re looking at life wishing to be rich? What are you doing to help get yourself there. Are you just paying to look the part? Why don’t you put action to get yourself there? Success should be something that you put your whole heart into and achieve. Maybe it is that promotion at work, maybe it is successfully running your own business and being your own boss. The thing is, these things are experiences, and experiences make you feel something, and you look back on those achievements and still get those butterflies or happy feels when you think about them.

The feelings you have for that stuff, although at first they make your heart race and you smile widely at it, that all eventually fades, doesn’t it. And then what?

You replace it with the newest version.

Replace with the newest version.

Replace with the newest version.

You get the point.

KB.