07/06/2023
𝐀𝐜𝐭 𝐘𝐨𝐮𝐫 𝐍𝐞𝐭 𝐖𝐨𝐫𝐭𝐡!!!
Let us be honest with ourselves. We are the masters of manipulating our financial lives to a “set of rules” that allow us to sleep soundly at night.
We can manipulate our paychecks, monthly budgets, cash flow, and credit card statements to reflect any artificial percentage or dollar threshold you can throw at us.
500$ a month budgeted for groceries, you say? Allow me to recategorize this Costco trip under “shopping” instead of “grocery”. Voila, the budget looks pristine again.
400$ unexpected car repair? I can just skim a little off my student loan payment, nobody will be any the wiser.
Herein lies the problem. We are fallible humans. Capable of self deception, endless justification, and irrational exuberance at our great money management skills. And I assure you, I am no exception.
So how can we protect ourselves from… ourselves?
With MATH. Math is logical. Math is cold. Math cannot lie. Math tells us what we rarely choose to see with our mind’s eye.
I recommend a personal finance approach that cannot be easily tampered with… ACT YOUR NET WORTH!!!
-Create a Net Worth Statement
Creating a net worth balance sheet is a basic accounting exercise. Track down your assets.
Checking and savings accounts, Home equity, Investments, Vehicle values, anything that you feel appropriate to place on the positive side of a ledger.
Next, the not so fun part. Track down and stare painfully at your liabilities. Credit card debt, car loan balances, student loan debt, remaining mortgage balance, personal loans. Anything you owe to another person shall be written down on this list.
Net worth = Assets - Liabilities
Do the math. What’s your number???
Is it depressingly negative? Is it astronomically positive? Try to objectively look at the number for what it is… cold heartless MATH.
-The 4 Net Worth Categories
You’ve now arrived at the point in the article that nobody enjoys. The part where I tell you how to live your life.
Sorry, not sorry.
That’s why you’re here, right?
I’m the financial guru slapping you out of complacency and into life changing action and subsequent wealth.
Great!!! On with the show then.
- Negative Net Worth
Alert! Warning! DEFCON 1! A Life threatening financial emergency is happening!!!
This is a wake up call. A 5 alarm fire is happening in your complainy pants right now. Do not pass go, do not collect 200$.
50% of you are likely in this scenario.
So how can we escape the sad land of literal negativity?
It is now your full time job to treat every dollar that comes into your life like it is a little pile of freedom granting gold. 1$ is now a substantial amount of money.
Mostly because every dollar you make belongs to someone else and ultimately because every dollar you spend is financed anywhere from 3% to 22%, depending on the source of your debt.
Credit card debt is a literal Solomon’s Yoke, and removing it from around your neck will be one of life’s greatest accomplishments.
If the miracle of compound interest is the 9th wonder of the world, then the evil of negative compounding interest is the 8th circle of hell.
Nothing should be “beneath” you.
Seeking additional income is a priority. Side gigs, extra call shifts, overtime, a weekend job, sending your spouse to work… everything should be considered and on the table. Be creative. Your family should have 100 hours of work under your belts every week until you complete this phase of life.
Spending is assuredly a large part of this issue. Frugality is a super power. The BIG 3 need to be addressed. Food, housing, and transportation.
ALDIs and clipping coupons is a must. Bulk buying at Sam’s Club or Costco may help.
Fancy restaurants are a no go. You will pack a lunch daily. You must cook at home to have success. Meal plan. Whole Foods and organic foods can wait.
Renting is an optimal choice in this situation. If you’re in a McMansion, please consider selling it and stepping down into a reasonable middle class living situation. Saving for a down payment is a ridiculous notion in your current state of emergency.
Do not despair, as this phase of life will be short lived and temporary. The “American Dream” will be a reality in your future, if you play the game correctly.
Vehicles… oh my word, don’t get me started. If you have a lease, get rid of it yesterday. If you have a car payment; sell the vehicle, take the cash, and buy a vehicle outright. If you have 2 car payments; sell them both, buy 1 reasonable vehicle and a bike.
You have no money, so drive a 10-15 year old Honda or Toyota like the rest of us. It’s ok, I promise nobody will notice or care.
No excuses or exceptions here. None.
We can address some of the lesser issues, like thermostat settings, gasoline use, Amazon spending, subscription services, cable and cell phone bills. I feel that if you make positive changes in the BIG 3, the minor spending categories will tackle themselves.
Remember, literally every dollar matters here. Do what it takes to save, pay credit card debt, invest if you can. Meet with your partner, get on the same page, make it a fun game.
The valuable reward is your freedom and your life!
0$-10,000$ Net Worth
Did you make it “Back To Broke”?
I would like you to shout out with elation, hug your partner, cry some tears of joy. Half of people won’t make it back to net worth zero.
Celebrate!!! Get a babysitter and go out for that nice meal you didn’t have for a year. Get a Starbucks. Give yourself a little taste of the good life as a reward. But just a LITTLE TASTE.
Wonderful, now reset your sights on some lofty goals.
In the 0-10,000$ net worth range, 1-9$ becomes statistically insignificant (4 digits of
numerical significance).
This means you’ve earned the first level of freedom and fresh air.
2$ freedom.
From now on, you don’t have to sweat bullets and have spousal disagreements on one time expenses less than 10$.
That doesn’t mean go overboard and re-dig the hole you just got out of. Nor should you fall into the “death by 1000 10$ cuts” trap. Lighten up a little but nothing substantial.
⁃ 10,000$-100,000$ Net Worth
That compound interest everyone talks about is a real phenomenon, isn’t it?
You’ve reached 10-99$ financial freedom.
It’s an odd sensation to go out to lunch, Netflix and chill, join a gym, or take your kids to that trampoline park without having to consult a spreadsheet, 3 budgeting apps, and call an emergency family meeting.
You have a nice cushion. You can also start making some awesome life choices.
-You can plan a home purchase.
-You can plan a retirement.
-You can plan a college fund.
-You can give money and time to charity.
-You can plan a family vacation or a luxury purchase.
I like to think this step is where the fun and motivation start to happen. The hard work, sacrifice, and discipline is second nature now and also paying off.
-Greater than 100,000$ Net Worth
I really have nothing left to teach you. The pupil has become the master. The world is now your oyster. Your path is of your own design.
You now have 100-999$ freedom.
Your goals might stem from purpose
driven questions.
“What will make me happy?”
“What do I value?”
“How do I make a meaningful impact?”
“How can I give my life purpose?”
My only request is that you guide others along the path you have now traveled.
Cheers!!!
