Learn How to Build Wealth Volume 3–Measure it!
An easy way to keep track of how well our financial wealth is developing or building is to measure our net worth. By keeping tracking of our net worth, not only does it help us know when we have arrived at our financial destination, but it also provides us with a reality check as to how we are doing.
Net worth is the difference between our assets and liabilities (debt). If the cash value of our assets is greater than the cash value of our liabilities then we have a positive net worth. However, if our liabilities are greater then our assets we have a negative net worth. Comparing the dollar values month to month help us see growth or decay.
We will define assets as, things we possess that can put money into our pockets. The most common form of assets include; property, stocks, bonds, mutual funds, and cash. Liabilities, on the other hand, are things that take money out of our pockets. They include such things as; loans, credit cards, and money borrowed from friends and family.