Speaker 1: Welcome to How the Money. I'm Joel and I and
Speaker 1: Matt's and today we are asking the question what are
Speaker 1: you worth? That's Rachel, what are you work? It's such
Speaker 1: a provocative question if you actually think about it. It's
Speaker 1: the value of a human life. Man. It's a lot
Speaker 1: economists will actually put a number on it, you know,
Speaker 1: like they run studies and whatnot. But it actually makes
Speaker 1: me think of a near where we live. On our
Speaker 1: part of town, there's an old fast food restaurant that's
Speaker 1: been closed for years, your Long John Silver's. Uh No,
Speaker 1: not that one. On the other side of the street.
Speaker 1: We have a lot of closed down faster restaurants nearby,
Speaker 1: But I'm talking about the one that says on one
Speaker 1: side of the sign that says what's your and then
Speaker 1: on the other side it says sole Purpose. So it's
Speaker 1: always kind of intrigued me. It's it's kind of you know,
Speaker 1: it's it's a provocative sign for me. It always kind
Speaker 1: of get you thinking a little bit. And so, you know,
Speaker 1: that was our goal for this episode, what's Your Worth?
Speaker 1: But we're specifically talking about your net worth. We're not
Speaker 1: gonna necessarily dive into all the things that we need
Speaker 1: to keep in mind when we are judging the quality,
Speaker 1: you know, of our life, our happiness. But yeah, we're
Speaker 1: we're talking about net worth. And I'm actually surprised that
Speaker 1: we haven't talked about this sooner before on the show. Yeah,
Speaker 1: me too. It's such an integral number to personal finance.
Speaker 1: It is, it is, and and obviously your net worth
Speaker 1: is important, but it's also not, of course, the most
Speaker 1: important thing. If it were, that would mean Jeff Bezos
Speaker 1: war is it's two times more important than me. And
Speaker 1: we know that's Hansu maybe maybe one or two billion.
Speaker 1: I'll give him that. He's only worth like five times
Speaker 1: more than you, exactly exactly the human capital. I don't
Speaker 1: know what that means, but right, But yeah, so we're
Speaker 1: gonna talk about net worth today. What net worth means,
Speaker 1: How you can calculate your own net worth, where it
Speaker 1: falls short, all those kind of things. Net Worth is
Speaker 1: the discussion we're gonna be having on the show today.
Speaker 1: Let's do it. But before we get to that, Matt
Speaker 1: not yet frugal or cheap and or the opposite of that,
Speaker 1: and maybe it's neither. Uh. The other day, if I
Speaker 1: did not get ripped off, but we kind of um.
Speaker 1: Birthday cards or buying a card in a store for
Speaker 1: someone is, oh, you ripped yourself off. I ripped myself off.
Speaker 1: I didn't plan ahead. And granted, I have kids, so
Speaker 1: I don't need to buy cards or anyone. I could
Speaker 1: just have them make it out of construction paper. But
Speaker 1: I kind of felt the need for some reason this
Speaker 1: year from my mom's birthday to get a for real card.
Speaker 1: Usually I go to Trader Joe's because there are one
Speaker 1: dollar cards and they're really nice, but I get some
Speaker 1: three butch chuck while you're at it. Yeah, maybe, and
Speaker 1: I just didn't have time to head to Trader Joe's
Speaker 1: this time, so I went to I went to Target,
Speaker 1: and I got a four dollar birthday card. I was
Speaker 1: looking at the cards. Some of them are nine and
Speaker 1: ten dollars for a birthday card, like music playing and
Speaker 1: like fuzzy stuff on the front. It's kind of crazy.
Speaker 1: It's out of control with a lot of money. But yeah,
Speaker 1: so did I rip myself off? Am I should I
Speaker 1: have been more frugal or cheap? Or is it okay
Speaker 1: every once in a while to last minute buy a
Speaker 1: four dollar birthday card for someone you love. I don't
Speaker 1: think need to beat yourself up over it. Four dollars
Speaker 1: in the grand scheme of things, is that a big deal? Like, No,
Speaker 1: if that was us, if we were in that situation,
Speaker 1: that's just an expense that goes into our our giving category,
Speaker 1: which that's our category of our budget every month that
Speaker 1: we set aside for birthdays and money that we spend
Speaker 1: on other people. But could you have spent those three dollars,
Speaker 1: those three additional dollars elsewhere, you know, if you since
Speaker 1: you didn't make it a traitor Joe's yeah, I guess,
Speaker 1: so you could have bought a bottle of wine. But
Speaker 1: I totally hear what you're saying. You know, I'm assuming
Speaker 1: you didn't plan ahead, you know not. And that's actually
Speaker 1: the most frustrating part for me when I spend money
Speaker 1: because I didn't plan ahead. And of course, you know,
Speaker 1: I thought about my mom's birthday, thought about what I
Speaker 1: wanted to give her. I love her very much, and
Speaker 1: it was one of those things though where the vessel
Speaker 1: I just I don't know why I felt the need
Speaker 1: to deliver it that way want to, and typically I'm
Speaker 1: kind of anti that, Like I am the guy who
Speaker 1: will make something out of construction paper myself pre kids
Speaker 1: like I will do that. I don't care, Emily, where's
Speaker 1: the construction paper? I told the markers, I totally used
Speaker 1: to do that. I don't care. Man, Yeah, I don't know.
Speaker 1: Just was one of those things that I I ended up doing,
Speaker 1: and I kind of beat myself up a little bit.
Speaker 1: I think it's totally fine to switch things up, you know,
Speaker 1: like that's something you've done in the past, but you know,
Speaker 1: it kind of makes it when you do by quote
Speaker 1: unquote fancy card, makes it a little more special. And
Speaker 1: on top of that, you're spending it on somebody else,
Speaker 1: And so I tend to feel a little more freedom
Speaker 1: when it comes to spending money on other people. You're
Speaker 1: being a little more altruistic. You're giving that away to
Speaker 1: somebody else. You know, it doesn't necessarily need to be
Speaker 1: the very best deal, because the fact is, like you
Speaker 1: are paying for something. You're paying for a tar J card,
Speaker 1: and I'm guessing those cards might be a little bit
Speaker 1: faancier than than the cards that a traitor Joe's. So
Speaker 1: even though it may not be something like that you
Speaker 1: normally would have done, I think it's I think it's
Speaker 1: totally fine, okay, all right, good, good to know. I'm
Speaker 1: glad you're not kicking me aside from my post as
Speaker 1: the co host of this No, no no, no, you're not
Speaker 1: on my list now for for people who have done
Speaker 1: poor things for their Okay, that's good to know. All right. Well,
Speaker 1: let's Matt mentioned the beer that we're gonna have on
Speaker 1: this episode. This one's called You Who Enter Here, and
Speaker 1: this is an Imperial stout by an awesome brewery right
Speaker 1: down the street from us called Orpheous Brewing. So specifically, man,
Speaker 1: this beer is a very special stat This isn't any
Speaker 1: ordinary stout. But we're not going to get into all
Speaker 1: that now. Well, we'll share our tasting notes and our
Speaker 1: thoughts about this beer at the end of the episode.
Speaker 1: That's right, all right, Matt, Let's get onto the subject
Speaker 1: at hand we're talking about. We'll talk about net worth exactly.
Speaker 1: So the big question of the day is what are
Speaker 1: you worth? And what is your net worth? And net
Speaker 1: worth is a really important measurement of your financial health,
Speaker 1: but you might not have any idea what yours is
Speaker 1: your monthly budget? Well, we've talked about that a lot.
Speaker 1: It's a great snapshot and it actually massively influences your
Speaker 1: net worth because the more you grow the gap between
Speaker 1: your monthly income and your expenses, the more you'll have
Speaker 1: additional money to grow that net worth through saving and investing.
Speaker 1: So I think of budgeting as an amongst the trees
Speaker 1: you while net worth is taking that helicopter ride up
Speaker 1: to get a view of the entire forest. And both
Speaker 1: perspectives are super helpful for anyone who's striving to get
Speaker 1: their finances in order and build wealth. But knowing your
Speaker 1: net worth and knowing how to figure it out and
Speaker 1: then how that factors into how you feel about your
Speaker 1: financial progress is something really important to look at. That's right, man, Essentially,
Speaker 1: net worth like it's a marker of how well you're
Speaker 1: doing specifically financially. You know, like there are going to
Speaker 1: be ups and downs, right depending on how long you've
Speaker 1: been investing. Your net worth might have taken a really
Speaker 1: big hit in March back when the markets declined, but
Speaker 1: if you held on tight like you've likely seen it
Speaker 1: rebound and even surpass maybe where it was before the pandemic.
Speaker 1: But the thing is, when it comes to making smart
Speaker 1: moves with our money, one of the biggest problems is
Speaker 1: that it can just be really difficult to measure or
Speaker 1: judge how well we're doing financially. You know, we talk
Speaker 1: about a lot of different numbers on the show. Personal
Speaker 1: finance can be really confusing, man, And because of this,
Speaker 1: we oftentimes will look outward to things that signal that
Speaker 1: we are doing well, you know. And so I'm talking
Speaker 1: about the things that we buy our home cars, like
Speaker 1: cell phones, and just like the things that we have
Speaker 1: delivered to our front doors. These things are terrible indicators
Speaker 1: as to how we're doing financially, but they're often the
Speaker 1: things that, you know, they catch your eye, and it's
Speaker 1: how we Unfortunately, you know, we'll compare ourselves to others
Speaker 1: as well, and we all know how others how they
Speaker 1: can have an impact on our perception of how we're doing. Yeah,
Speaker 1: and that perception informs so much of how we feel
Speaker 1: about our progress. And another I think in effective way
Speaker 1: for us to measure how we're doing is by one
Speaker 1: other specific number. We consider our salary or our last
Speaker 1: paycheck as being the marker of how well we're doing financially.
Speaker 1: If we make a good income, if that paycheck is
Speaker 1: big every two weeks, then we feel good about where
Speaker 1: we are in in regards to our standing with money.
Speaker 1: But we're talking about net worth and that is a
Speaker 1: much more important factor than just your salary or your income.
Speaker 1: It's a much better barometer of how you're doing. And
Speaker 1: I think if you if you do well, if you
Speaker 1: make a decent salary, it can be attractive to two
Speaker 1: people like software engineers, doctors, or lawyers maybe to consider
Speaker 1: their income as one of the major representatives of how
Speaker 1: they're doing financially. But it doesn't matter how big your
Speaker 1: income is if you're spending it all every month, and
Speaker 1: if you're only looking at income and you're not looking
Speaker 1: at your expenses, then you're only seeing a part of
Speaker 1: the equation. And so compared to buying that others can see,
Speaker 1: our salary is a bit more private, but unfortunately it's
Speaker 1: still a measure we tend to hang our hat on,
Speaker 1: and we think that net worth gives you a kind
Speaker 1: of a more balanced approach to seeing how you're actually
Speaker 1: doing when it comes to your money. Yeah, both of
Speaker 1: these things, right, your salary and what it is you
Speaker 1: spend your money on. Both of these things are relative,
Speaker 1: and so because of that, they are their poor measures
Speaker 1: of how well we actually are doing financially, so obviously, yeah,
Speaker 1: this is where net worth comes in handy and why
Speaker 1: it's so important. It's just a great snapshot to to
Speaker 1: quickly visualize how our overall finances are doing, you know.
Speaker 1: Unlike relying on salary, which only focuses on your income,
Speaker 1: or just relying on buying stuff right, which only focuses
Speaker 1: on some of our expenses. Net worth looks at the
Speaker 1: entire picture and is able to give you cold, hard
Speaker 1: numbers that that tell you like it is, part of
Speaker 1: net worth strength lies in the fact that it's consistent. Uh,
Speaker 1: it's unbiased, you know, it doesn't fluctuate with our emotions.
Speaker 1: We're human and and so that's why it's good for
Speaker 1: us to let data to allow that the proper numbers
Speaker 1: to inform how we're actually doing when it comes to
Speaker 1: our personal finances. And then on top of that too,
Speaker 1: it can also be great when it comes to to
Speaker 1: goal setting. Since you know your net worth, it is
Speaker 1: so easily measured. So yeah, just after the break will
Speaker 1: cover how to track it and how to grow it.
Speaker 1: And of course Matt and I we believe that your
Speaker 1: net worth is important. We've been talking about why it's
Speaker 1: an important gauge. But it also has its shortcomings and
Speaker 1: we'll discuss those things too. Right after this all, Joe,
Speaker 1: we'll back from the break. We're talking about net worth
Speaker 1: and why it's such an important thing, and it is,
Speaker 1: like you said, it's very important for us to detract
Speaker 1: our net worth. It's a very helpful number. But the
Speaker 1: thing is, it's not perfect, you know. It does fall
Speaker 1: short depending on what's going on in the market. Uh,
Speaker 1: your net worth, it can have big ups and downs.
Speaker 1: So for example, I'm thinking, if you bought a home
Speaker 1: in two thousand and six and you still own it
Speaker 1: today for close to a decade, owning that home likely
Speaker 1: didn't not improve your net worth as the value plummeted
Speaker 1: and slowly then begin to to rise in the coming years,
Speaker 1: and so from one year to the next, depending on
Speaker 1: on how your money is allocated. Net Worth isn't the
Speaker 1: best benchmark of how you are actually doing, you know,
Speaker 1: especially considering all the other areas of our lives that
Speaker 1: are arguably even more important than you know, how much
Speaker 1: we're worth. Yeah, your net worth isn't the end all
Speaker 1: be all. It doesn't dictate your level of happiness, right.
Speaker 1: Sometimes the people with the highest net worths are actually
Speaker 1: the unhappiest among us, and vice versa can be true.
Speaker 1: People with very little net worth can find so much
Speaker 1: value in the most important things in life, which are
Speaker 1: typically people and how you spend your time. And you
Speaker 1: don't need a high net worth in order to enjoy
Speaker 1: those finer and cheaper things in life, right, like spending
Speaker 1: time with your friends, going on a family hike, the
Speaker 1: occasional fine craft beer, while that one bottle, like all
Speaker 1: those things, that one bottle might be kind of expensive,
Speaker 1: but it's not ridiculously expensive. And even a lot of
Speaker 1: people a very little means can afford a nice beer
Speaker 1: from time to time. So while we're talking about the
Speaker 1: importance of net worth as a measuring stick in this episode,
Speaker 1: remember the other important non financial measuring sticks to the
Speaker 1: title of this episode is what are you worth? And
Speaker 1: the answer, in part at least, is that you're not
Speaker 1: worth what your net worth is. And while it is
Speaker 1: a good barometer, that doesn't directly inform the value of
Speaker 1: your life and and how much fun and joy you
Speaker 1: can have. Yeah, there are lots of other aspects of life,
Speaker 1: right I'm thinking of like quality relationships. I'm thinking of
Speaker 1: the ability to to kind of manage our own time
Speaker 1: if you have like time, freedom and like meaningful work, Like,
Speaker 1: there are so many different ways that we need to
Speaker 1: keep in mind. All those things lead to more balance
Speaker 1: and happiness in our lives. So we're saying that because
Speaker 1: we want to make sure that we couch this episode
Speaker 1: a little bit and you know, the things that are
Speaker 1: a little more important. But that being said, let's kind
Speaker 1: of move forward now with you know, money, Like, that's
Speaker 1: what we talk about on the show. We've been talking
Speaker 1: about net worth, why it's important, why it's not overly important,
Speaker 1: but let's get a little more practical with it. Let's
Speaker 1: talk about how you can determine your net worth. A
Speaker 1: lot of folks out there probably wondering how you can
Speaker 1: figure the darn thing out. And the simple formula is
Speaker 1: you take your assets owned minus your debts owed. Your
Speaker 1: debts are your liabilities owed. So on the asset side,
Speaker 1: you know, you'll take ato account your your savings, different
Speaker 1: investments you have, the value of your home or maybe
Speaker 1: a business you own, basically anything that has significant value.
Speaker 1: And then on the debt side, you want to include
Speaker 1: car notes, mortgage balances, student loans, credit cards, basically anytime
Speaker 1: you have payments, especially ones that are recurring payments. These
Speaker 1: are all examples of liabilities. All right, question for a friend, then, Matt,
Speaker 1: does their beanie baby collection count in their net worth? Like?
Speaker 1: Is that something that's valuable enough to count? That's actually
Speaker 1: a good question because I think it would depend on
Speaker 1: how valuable that odd thing that they have is, you know,
Speaker 1: because I mean the short answer what you're looking for
Speaker 1: is no, like that doesn't really count. Like these are small,
Speaker 1: insignificant things that we own. Maybe your collection is that's
Speaker 1: the thing, Like, there might be somebody who owns something
Speaker 1: like that's really really valuable in the thousands of dollars.
Speaker 1: And so if you own something that is worth I
Speaker 1: would say over five or ten dollars, I think that's
Speaker 1: when I at least would start including that when I'm
Speaker 1: calculating my net worth. Yeah, if you can hop on
Speaker 1: eBay and tell your meanie babies for five grand tomorrow,
Speaker 1: then count them in your network. That's an asset exactly.
Speaker 1: But I mean that being said, so the way we're
Speaker 1: talking about determining your net worth here like is by
Speaker 1: doing it by hand. And while that is actually a
Speaker 1: pretty simple formula, it's not the easiest way, so they're
Speaker 1: actually better, faster ways to do it, and so that's
Speaker 1: what we're gonna talk about next. Yeah, totally. I love
Speaker 1: kind of having some help in that regard, and it
Speaker 1: just makes me think of why I had to learn
Speaker 1: certain kinds of math when there were calculators that I
Speaker 1: could use. And the same thing holds is that, like,
Speaker 1: you don't necessarily have to figure out how to continually
Speaker 1: update your net worth by hand when you can use
Speaker 1: some sort of software that's gonna help you do that.
Speaker 1: On the rag and Matt, I've been using Mint for
Speaker 1: a long time now, and while it doesn't have any
Speaker 1: of the features that a service like wine app has,
Speaker 1: which is specifically trying to help people budget, Mint is
Speaker 1: great for we're tracking what you have spent, and it
Speaker 1: helps you keep up with your overall assets and liabilities
Speaker 1: and and so in that regard, it helps you stay
Speaker 1: up to speed on your net worth. If you look
Speaker 1: on the left hand side when you log into Mint,
Speaker 1: if you have a Mint account, you can get a
Speaker 1: real handy snapshot of your net worth on all of
Speaker 1: your pertinent accounts as you plug into log in information
Speaker 1: for your bank accounts for your investment accounts and you
Speaker 1: list what sort of car you own and properties you own.
Speaker 1: It will keep an updated tab of exactly where you're
Speaker 1: at when it comes to your net worth, and I
Speaker 1: like being able to see that snapshot on the RAG
Speaker 1: when I log in. It's one of my favorite things
Speaker 1: about using Mint for sure. Nice man, you know, actually
Speaker 1: meant was the first time I saw my net worth?
Speaker 1: You know, like back in the day, I had entered
Speaker 1: in all my accounts, kind of linked up my accounts,
Speaker 1: and that was the first time I kind of was
Speaker 1: aware of the fact that, like, oh yeah, I guess
Speaker 1: net worth is something that is good to start tracking.
Speaker 1: But recently I've been using Personal Capital, you know, so
Speaker 1: like Mint, you can see an up to date figure
Speaker 1: of your net worth without having to do a bunch
Speaker 1: of math by hand, but Personal Capital leans a little
Speaker 1: more into the investing side of things that Mint does.
Speaker 1: One of the things I love about Personal Capital is
Speaker 1: that it's got this thing called a you Index, which
Speaker 1: is essentially how your net worth is performing over time.
Speaker 1: They're able to combine all of your investment holdings into
Speaker 1: a single number, and then you can track that along
Speaker 1: uh and compare it with other indexes like the SMP
Speaker 1: five hundred and so you essentially can see how your
Speaker 1: you know you index, like how you are doing compared
Speaker 1: to the overall market are depending on whichever index you
Speaker 1: want to follow. So, man, I found that to be
Speaker 1: really stinking cool. And a lot of folks have not
Speaker 1: heard of personal capital before. I actually just wrote a
Speaker 1: review up on our website there at how too many
Speaker 1: dot com and we'll make sure that we linked to
Speaker 1: it in our show notes for this episode. So much
Speaker 1: better than like a stone tablet and a chisel, like
Speaker 1: keeping your net worth Like that not the way to
Speaker 1: do it. I prefer Papyrus. Do you know your love
Speaker 1: for ancient Egyptian history is coming out right now? Well?
Speaker 1: I do like history and crappy typefaces, all right. Well,
Speaker 1: so now that we know, maybe the designer side of
Speaker 1: me coming up. Yeah, I mean you know about Pappy,
Speaker 1: about Papa IRUs, I mean, is that is that actually
Speaker 1: a type font? Yeah? I didn't know that. It's it's
Speaker 1: like this, yeah, dude, I know, like times, Doon, Roman
Speaker 1: and aerial, that's all I know. Sorry. And Helvetica here
Speaker 1: A lot of designers like that one, right, Yeah, Hevetica
Speaker 1: is a great one. But Papyrus is like this one
Speaker 1: that's known. It's kind of got this cult following of
Speaker 1: people because so many individuals use it to like when
Speaker 1: they're making like their own business card or they're making
Speaker 1: their own sign or something like that. A lot of
Speaker 1: graphic designers like to make fun of it, because a
Speaker 1: lot of non designers love to use it because it
Speaker 1: looks fun, it looks interesting. Uh, and so it gets
Speaker 1: a bad rat because of that. All right, Yeah, if
Speaker 1: the late person is using it and the professionals not,
Speaker 1: I can understand that. All right, Well, let's talk about
Speaker 1: to Matt. Obviously, if you're using one of those services
Speaker 1: to help you track your net worth, that's gonna be
Speaker 1: really nice. It's gonna come in handy. But evaluating what
Speaker 1: you're seeing then is really important. It would be ideal,
Speaker 1: of course, to see your net worth grow every single month,
Speaker 1: but market shift and you will see fluctuation. And so
Speaker 1: as long as you're consistently saving more of your income
Speaker 1: and investing it wisely while at the same time avoiding
Speaker 1: unhelpful debt, that number will grow. It's just not going
Speaker 1: to be like consistently up into the right trajectory, right
Speaker 1: and I think for those of us who are maybe
Speaker 1: a little more anal retentive when it comes to following
Speaker 1: our net worth and tracking it, we might get bummed
Speaker 1: with the market has a temper centrop in a month
Speaker 1: and we're like, man, my net worst down. That's not cool. Um.
Speaker 1: But yeah, like we said, net worth is a helpful
Speaker 1: measuring stick, but it's not perfect. And so yeah, when
Speaker 1: those markets do shift and when our net worth takes
Speaker 1: a hit, that shouldn't be a hit to our confidence
Speaker 1: or make us feel like we're not doing it right.
Speaker 1: That's just kind of part of how things go as
Speaker 1: we're building wealth for the future, that's right, man. And
Speaker 1: the thing is too, I mean over the course of
Speaker 1: years right over, Like when you zoom out, you do
Speaker 1: want to see your net worth going up over time
Speaker 1: if you are seeing it kind of instead of going
Speaker 1: up into the right, if you're seeing it going down
Speaker 1: into the right, like, that's that's a bad sign cause
Speaker 1: for concern exactly. But I mean, I think a lot
Speaker 1: of our listeners too might be wondering, like when it
Speaker 1: comes to a specific numbers, like what should I be
Speaker 1: not necessarily getting for what's normal right now? You know,
Speaker 1: like where should I be in United We came across
Speaker 1: some stats, uh, and it showed that the median net
Speaker 1: worth for somebody who is under thirty five is eleven
Speaker 1: thousand dollars. And so if you have calculated your net
Speaker 1: worth and you're like, I'm only sitting at like two grand,
Speaker 1: that's okay. There's not this massive chasm between you and
Speaker 1: what the median person has and what. We wanted to
Speaker 1: share that because it can be helpful to see where
Speaker 1: you know your peers were other stack up, yeah, Matt.
Speaker 1: And it's interesting too, because net worth is so much
Speaker 1: about numbers. It's literally this hard number of assets minus debts.
Speaker 1: But at the same time, there's a certain sense to
Speaker 1: which your net worth is not a direct reflection of
Speaker 1: a number. And let me give this example of kind
Speaker 1: of what I mean by that. For instance, if you
Speaker 1: went back to school to get an m b A
Speaker 1: and that cost fifty dollars, and you're now in fifty
Speaker 1: dollars of student loan debt because you went back to
Speaker 1: get that NBA, well, that will negatively affect your net
Speaker 1: worth for a number of years. But the goal of
Speaker 1: getting that n b A is that you will have
Speaker 1: increased earnings after graduation for years and years to come,
Speaker 1: and that your ability to earn just a much better
Speaker 1: income over decades is going to far outwaigh the student
Speaker 1: loan debt you took on in order to get that
Speaker 1: advanced degree. But on the other end of the spectrum, right,
Speaker 1: let's say you bought a new Tesla and that is
Speaker 1: essentially going to be a drag on your net worth
Speaker 1: because you'll never see a return on that investment. A
Speaker 1: car depreciates over time consistently, and is it going to
Speaker 1: pay back in any meaningful way. So when we're talking
Speaker 1: about maybe debts that we take on that will affect
Speaker 1: our net worth, let's think about whether that debt has
Speaker 1: the ability to positively affect our net worth in the future.
Speaker 1: And if it does, then there's a conversation that we
Speaker 1: need to have and it's something we need to think through.
Speaker 1: And if it doesn't, I think it should make us
Speaker 1: pause even more before we consider taking on that debt.
Speaker 1: And I'm not saying that nobody should buy a new car,
Speaker 1: but you might want to make sure your net worth
Speaker 1: is in a good position before you do. Yeah, that's right, man.
Speaker 1: It's important for us to consider the quality or the
Speaker 1: different types of debt that we're settling ourselves with when
Speaker 1: we are calculating our at worth. And one of the
Speaker 1: coolest things too about net worth, man, is you know,
Speaker 1: you don't necessarily have to to make a massive income
Speaker 1: in order to really build up your net worth over time.
Speaker 1: Growing that number requires spending less than you bring in
Speaker 1: and saving and investing that difference. Like, that's it. The
Speaker 1: larger we can grow that gap, the faster that we
Speaker 1: can accelerate our net worth goals. But you don't have
Speaker 1: to make six figures in order to have a meaningful
Speaker 1: net worth every year. You know, I read a story
Speaker 1: about someone who worked a normal job as a secretary
Speaker 1: or a jenitor for like five or six decades and
Speaker 1: then dies with you know, five seven, eight million dollars
Speaker 1: in investments. You know, we'll link to a couple of
Speaker 1: those stories in our show notes, but like those are
Speaker 1: just so stink and inspiring, and it really illustrates the
Speaker 1: fact that you don't have to be a software engineer
Speaker 1: or a lawyer like you mentioned earlier, Joel, in order
Speaker 1: to to have and to grow a massive net worth. Yeah,
Speaker 1: I agree, man, I love reading stuff like that, and
Speaker 1: and the goal is not necessarily to die at the
Speaker 1: right old age of with eight million dollars in investments. Right,
Speaker 1: It's not that your net worth should be hoarded and
Speaker 1: shouldn't be used in retirement. But at the same time,
Speaker 1: when you read those stories in your Man, secretaries and janitors,
Speaker 1: people that had a really low income, we're able to
Speaker 1: build up a meaningful net worth through their investing lifetime.
Speaker 1: And it's like, man, if they can do it, so
Speaker 1: can we all of us out there? All right, Matt,
Speaker 1: we got more to get to, including the difference between
Speaker 1: liquid net worth and overall net worth and what if
Speaker 1: you've got a negative net worth. We'll tackle some of
Speaker 1: those questions right after this break. All right, Joel, we're
Speaker 1: back from the break, and we're talking about net worth man,
Speaker 1: and we're gonna talk about how to grow your net worth.
Speaker 1: But before we talk about that, we're gonna touch on
Speaker 1: liquid net worth. I'll be honest, every time I hear
Speaker 1: liquid net worth, it kind of makes me think of
Speaker 1: like liquid gold, which makes me think of like an alexer. Oh,
Speaker 1: it makes me think of LVDA cheese. Oh my gosh,
Speaker 1: so gross. IM gonna say it makes me think of
Speaker 1: have you ever seen Sweeney Todd. No, I haven't the
Speaker 1: kids sings like this song is like Bye parell Lea's
Speaker 1: miracle e licks. Sir, But is this cure all that
Speaker 1: you hear? Like hawks in like these olden times, I
Speaker 1: can't hear liquid net worth and not think of liquid
Speaker 1: gold elixirs. Get ready for Matt spinoff podcast where all
Speaker 1: he does is sing, I'm just gonna say the only
Speaker 1: two lines from every musical. I know it'll be a
Speaker 1: compact format podcast. I think I think people are gonna
Speaker 1: be into it. Yeah, all right, So let's talk about
Speaker 1: liquid net worth. And when you look at the the
Speaker 1: median American net worth Matt you mentioned, if it's under
Speaker 1: thirty five, it's eleven thousand dollars. The overall age adjusted
Speaker 1: American average net worth is a hundred thousand dollars. But
Speaker 1: most of that net worth is tied up in home equity,
Speaker 1: so it's not typically easily accessed, especially if someone has
Speaker 1: been in a home, let's say for fifteen twenty years,
Speaker 1: and they've built up a meaningful amount of home equity
Speaker 1: as they paid down the mortgage as their home has
Speaker 1: risen in value. That's great, but you don't necessarily have
Speaker 1: easy access to those funds, and so liquid net worth
Speaker 1: can be a better measure of your ability to react
Speaker 1: to financial shocks and financial opportunities than just knowing your
Speaker 1: overall net worth. You don't really have it at hand
Speaker 1: for when needs actually arise. So I think that leads
Speaker 1: to to kind of a subpoint that diversified net worth
Speaker 1: is a really important thing for people to shoot for. Two,
Speaker 1: If they're putting all their eggs in one basket and
Speaker 1: it's all about their homes appreciation and they're not saving,
Speaker 1: and they're not investing, and they're not trying to grow
Speaker 1: their net worth in other ways, well we would suggest
Speaker 1: taking kind of a more of a multi pronged approach
Speaker 1: to growing your net worth and not just banking on
Speaker 1: your home's value increasing. Yeah, which isn't a bad thing, right,
Speaker 1: it's not a bad thing that we've seen in the
Speaker 1: value of our homes increase. But a lot of times
Speaker 1: it's difficult to access that money, you know. I mean,
Speaker 1: how difficult is it right now to get a helock? Uh,
Speaker 1: It's impossible, you know. And even then then you have
Speaker 1: to pay to access your net worth, get to pay
Speaker 1: interest to the bank in order to get some of
Speaker 1: that money back in your life. So it's net worth
Speaker 1: on paper, which is great, but it's not net worth
Speaker 1: in your pocket exactly. Yeah, and so a lot of
Speaker 1: folks too might be asking the question, like, what if
Speaker 1: my net worth is negative? Right? And so, for example,
Speaker 1: let let's say someone is young, like maybe under twenty
Speaker 1: five years old. If they are like, there's a good
Speaker 1: chance that that person has a negative net worth. But
Speaker 1: if you are that young and you know, maybe you
Speaker 1: have a decently positive net worth, and kudos to you
Speaker 1: for for being so on the ball. But for everyone else,
Speaker 1: you know, the main reason your net worth will typically
Speaker 1: be negative at this point is because the student loans
Speaker 1: and or maybe the lack of years of investing under
Speaker 1: your belt. That's one example. Another example might be, uh,
Speaker 1: maybe you are older, right, and maybe you haven't prioritized investing,
Speaker 1: and on top of that, maybe you've been too willing
Speaker 1: to take on debt. In that case, maybe doing that
Speaker 1: calculation and seeing that ugly net worth number can be
Speaker 1: just the motivation you need to to finally make some changes. Yeah,
Speaker 1: we don't want to be like the ostrich, put our
Speaker 1: head in the sand not know the number, because I
Speaker 1: think when we do that, sometimes we maybe think we're
Speaker 1: doing better than we are, or maybe vice versa, sometimes
Speaker 1: we think we're doing worse than we actually are, and
Speaker 1: so having the facts in front of us can help
Speaker 1: us make a more informed, better decision. And Matt, I agree.
Speaker 1: I love what you said about negative net worth. A
Speaker 1: lot of younger people strapped with student loans are going
Speaker 1: to do the calculation and they're going to realize that
Speaker 1: their net worth is negative, and then just getting to
Speaker 1: zero net worth is going to be a huge triumph.
Speaker 1: And it's actually even just more of a reason to
Speaker 1: get on the ball with with tracking it and attempting
Speaker 1: to grow that net worth and then setting new milestones
Speaker 1: for you to be able to achieve. And I think
Speaker 1: net worth milestones, while like we said, can fluctuate, it
Speaker 1: can be helpful to kind of have those in the
Speaker 1: back of your mind as you think about what it
Speaker 1: looks like to make progress with your own personal finances. Yeah. Absolutely, man,
Speaker 1: you definitely don't want to discount climbing out of debt,
Speaker 1: like I mean, basically that's what you're saying. You're saying
Speaker 1: that like a lot of a lot of young folks
Speaker 1: are gonna spend a lot of time getting from negative
Speaker 1: just to get up to zero. Uh. And you don't
Speaker 1: want to discount those gains made, you know, like getting
Speaker 1: on a debt's an awesome goal in and of itself. So, next, dude,
Speaker 1: let's talk about ways for individuals to grow their net worth.
Speaker 1: First of all, it's gonna be slow and steady. You know,
Speaker 1: it's it's a marathon, not a sprint, growing growing your
Speaker 1: net worth. It's not like a get rich scheme. But
Speaker 1: it's a process of building wealth slowly. Uh. And so
Speaker 1: there are just honestly millions of different ways to increase
Speaker 1: your net worth, from something as small as, you know,
Speaker 1: maybe spending a little less on take out, to to
Speaker 1: something larger, you know, something as big as maybe a
Speaker 1: new job with a massive bonus. But then taking those
Speaker 1: different financial wins and then you know, telling that money
Speaker 1: what to do is crucial to growing your net worth.
Speaker 1: And what we're talking about here essentially is budgeting. You
Speaker 1: need to be able to take the money that you
Speaker 1: have and put it to work for you. We've done
Speaker 1: episodes before on budgeting. Episodes fifty one, episodes one seventy six.
Speaker 1: Both of those were kind of different takes on budgeting,
Speaker 1: but for the vast majority of us, budgeting is such
Speaker 1: an important practice for us to implement into our lives
Speaker 1: in order to to grow that net worth number. Yeah,
Speaker 1: if you're not budgeting, there's a there's a good likelihood
Speaker 1: you're not pursuing a higher net worth as as well
Speaker 1: as you could be. And in the end, Matt, we
Speaker 1: come back to this. It's two fundamentals to determine that
Speaker 1: networth number, decreasing debts that you owe and increasing the
Speaker 1: assets that you own. For most folks, this means investing
Speaker 1: more in the stock market, specifically in retirement accounts that
Speaker 1: you have access to. If your employer offers a four
Speaker 1: oh one K with a match starting there, or you
Speaker 1: work or the government and you have a TSP offered
Speaker 1: to you, that's in all likelihood where you're gonna want
Speaker 1: to start investing. And if you don't have access to those,
Speaker 1: opening up your own i RA, a in low cost
Speaker 1: widely diversified index fund that is going to move that
Speaker 1: level of assets that you own, which over time is
Speaker 1: gonna have a massive effect on at least at one
Speaker 1: half of your net worth. Yeah, and practically speaking, you
Speaker 1: can open your own retirement account on platforms that we
Speaker 1: mentioned all the time, like Vanguard, Fidelity, even M one
Speaker 1: and ally have great options as well. And so, Joe,
Speaker 1: you talked about increasing your assets owned, when it comes to,
Speaker 1: you know, decreasing your debts owed, we're talking about paying
Speaker 1: down debt, high interest rate credit card debt like that
Speaker 1: needs to be gone as soon as possible. That's a
Speaker 1: no brainer. But then any debt that you have that's
Speaker 1: maybe less than six percent, that's gonna be a more
Speaker 1: nuanced conversation, right, And so, for example, you don't want
Speaker 1: to give up a company four one K match and
Speaker 1: then the compounding returns that you would receive from the
Speaker 1: market in order to pay off maybe a sub three
Speaker 1: percent mortgage. And so in this is that kind of
Speaker 1: depends on your individual circumstances and what your interest rates are. Yeah,
Speaker 1: most of us, when we're building our net worth, we're
Speaker 1: not focused solely on one or the other. We're almost
Speaker 1: doing both at the same time. Like every month, I'm
Speaker 1: paying off on my mortgage and the mortgages for my
Speaker 1: rental properties, but I'm also putting money into my four
Speaker 1: oh one k in my IRA, and so at the
Speaker 1: same time, I'm decreasing my debts and I'm increasing my assets,
Speaker 1: and so my net worth is starting to see a swing.
Speaker 1: And after you're doing that same process over a number
Speaker 1: of years, you start to see a real shift and
Speaker 1: what your net worth looks like. The great thing about
Speaker 1: building your net worth is that at a certain point
Speaker 1: in time, it starts to swing so hard and keep
Speaker 1: going up so quickly that it feels like the money
Speaker 1: that you've already put into those assets is doing a
Speaker 1: lot of the heavy lifting for you. Exactly. Essentially, that's nirvana,
Speaker 1: right Like when you are able to have your money
Speaker 1: working for you harder than you are working for your money.
Speaker 1: That's basically when you become financially independent. Yeah, exactly, and
Speaker 1: that's when you're like, man, I'm so glad I paid
Speaker 1: attention to my net worth all those years, exactly. It's know.
Speaker 1: Hopefully this conversation has helped people think about their net worth,
Speaker 1: the importance of tracking it, and also the ability to
Speaker 1: know how important it is in your financial life. It's
Speaker 1: of a lot of importance, but it's also not of
Speaker 1: ultimate importance. Basically, when it comes down to it, you
Speaker 1: don't equal your net worth, and in particular, if you're
Speaker 1: a younger listener who recently got out of college and
Speaker 1: you're trying to get your money game together, and your
Speaker 1: net worths in the negative. That doesn't reflect poorly on you.
Speaker 1: And even if you're older and you've got a negative
Speaker 1: net worth, that doesn't mean you're less of a person.
Speaker 1: It's a number that can be really helpful for seeing
Speaker 1: your personal finances in a quick snapshot, and it does
Speaker 1: a decent job of helping to reflect your personal financial
Speaker 1: progress over the years. But if your net worth isn't
Speaker 1: where you want it to be right now, don't let
Speaker 1: that get you down. There are all sorts of ways
Speaker 1: to attack that goal in the future while giving yourselves
Speaker 1: some grace right now recognizing that you aren't exactly where
Speaker 1: you want to be, but you can get there in
Speaker 1: the future. Yeah, I think we should all be tracking
Speaker 1: and keeping it with our net worth, But you know,
Speaker 1: at the same time, this is one of those instances
Speaker 1: where it's important to maintain something Allan's right at the
Speaker 1: same time, like, we should avoid obsessing over that number
Speaker 1: because there's more to life than just a dollar amounts.
Speaker 1: So if you have a mental or personal capital account,
Speaker 1: maybe check that net worth monthly, you know, just to
Speaker 1: check in or maybe even just once a quarter if
Speaker 1: you know you are prone to maybe looking at that
Speaker 1: number a little too much as you're precious. You know,
Speaker 1: it's an important number to know, but make sure you
Speaker 1: know you do keep it in perspective. At the same time, hopefully,
Speaker 1: through consistent habits of saving and investing, we're all steadily
Speaker 1: increasing that net worth towards the status of becoming financially
Speaker 1: independent one day. Yeah, that's the goal man, financial independence.
Speaker 1: I think nirvana. That's that's when you and I are
Speaker 1: aiming four. That's what we want our listeners to be
Speaker 1: aiming for. We we do think that if you handle
Speaker 1: money well over a long period of time, you can
Speaker 1: achieve financial independence. And like we said earlier, Janitor secretaries,
Speaker 1: they've been able to do it over the years on
Speaker 1: small amounts of pay. It doesn't take earning six figures
Speaker 1: in order to get there. All right, Matt, Let's get
Speaker 1: back to the beer that we had on the show today.
Speaker 1: This one's called Ye Who Enter Here by Orpheus Brewing.
Speaker 1: It's an Imperial stout aged in whiskey barrels with chili peppers,
Speaker 1: coffee and vanilla beans. Which means this thing is packed
Speaker 1: with like massive amounts of flavors. So what are your
Speaker 1: thoughts on this beer? Dude? Dude, this is such a
Speaker 1: good beer. Uh, Like you mentioned all the different ingredients there,
Speaker 1: and so I will first state that this beer isn't
Speaker 1: too heavy in body. I think sometimes when you read
Speaker 1: a label like that and you see all the different
Speaker 1: flavors that are packed in there, you expect it to
Speaker 1: maybe almost be like soupy. But I feel like this
Speaker 1: one has found a perfect balance and being you know,
Speaker 1: heavy enough to where it can contain all those flavors,
Speaker 1: but then not too heavy to where you don't want
Speaker 1: to finish this beer. First though, I want to point
Speaker 1: out the fact that the chili peppers, man, it has
Speaker 1: a perfect amount of heat you know in the throat
Speaker 1: for sure, And most people are probably listening are like
Speaker 1: heat in a beer. What are you talking about, dude?
Speaker 1: That chili pepper spice is so good? Chili peppers in
Speaker 1: a stout, Man, it's like a match made in heaven
Speaker 1: in my opinion, and they basically perfected it in this beer.
Speaker 1: It's so good. Yeah, And I feel like to be
Speaker 1: with his beer when you take it and you swirl
Speaker 1: it a little bit. The head of the beer, like
Speaker 1: the tiny little bubbles. It almost has kind of like
Speaker 1: a like a red chili pepper kind of color to it.
Speaker 1: Totally kind of accentuates the fact that there's a little
Speaker 1: bit of heat in this beer. But obviously you can
Speaker 1: taste those coffee notes, like those deep, earthy, uh stout
Speaker 1: like notes. But then it's got that vanilla as well
Speaker 1: to kind of brighten it up and kind of shine
Speaker 1: some light on this beer and give a little little
Speaker 1: bit of sweetness. Yeah, exactly. I mean, I think the
Speaker 1: sweetest suit comes from the fact that's Asian whiskey barrels.
Speaker 1: That always adds a nice sweet note to it that
Speaker 1: I'm always looking for. But yeah, man, what were your
Speaker 1: additional thoughts on this beer? I mean, dude, I love
Speaker 1: stouts with chili peppers that are aged in barrels for
Speaker 1: two years. I mean yeah, this was basically a perfect
Speaker 1: representation of the style and it's one of my favorite styles,
Speaker 1: so I thoroughly enjoyed it. Not to mention on the label,
Speaker 1: one of one of my favorite Atlanta artists got to
Speaker 1: draw the label for this one. His name's our Land
Speaker 1: and his art is incredible and so I mean it's
Speaker 1: like a trifecta of like a local beer, an incredible beer,
Speaker 1: and then awesome art on the label. So yeah, you
Speaker 1: and I we actually both have some are Land artwork
Speaker 1: up on her home. But he's a in particular in
Speaker 1: this part of town, the parts that we live in.
Speaker 1: There is a lot of his artwork around town. You know,
Speaker 1: he's kind of like a street artist, but it's like
Speaker 1: this mix between it's he's kind of like a folk
Speaker 1: street artist. Maybe it's herben Folk or something maybe like
Speaker 1: what I've probably classified as urban forbin folk, Yeah, exactly,
Speaker 1: And so we see a lot of his stuff around town. Uh,
Speaker 1: and it's also great to see his artwork on the
Speaker 1: label as well. So man, I'm glad you and I
Speaker 1: got to share this one. For folks who happen to
Speaker 1: be in the Atlanta area, definitely look or fee us
Speaker 1: up if you haven't already. Yeah, they're basically located in
Speaker 1: Piedmont Park, right off the belt line. It's a great place,
Speaker 1: very central in Atlanta. Yeah for sure. All right, Matt,
Speaker 1: that's gonna do it for this episode. For anybody who
Speaker 1: wants show notes for this episode, including a link to
Speaker 1: some of the places where you can accurately track your
Speaker 1: net worth. Check out our show notes on our website
Speaker 1: at how to money dot com, and we would be
Speaker 1: incredibly thankful, if you haven't already, if you left us
Speaker 1: a review over at Apple Podcasts or honestly, wherever it
Speaker 1: is that you listen to podcast those reviews, honestly, they
Speaker 1: help us keep going and growing at the same time. Man,
Speaker 1: all right, that's gonna be it for this episode, Joel.
Speaker 1: Until next time, Best Friends Out, Best Friends Out.