Happiness isn’t getting what you want
It’s wanting what you got
– Garth Brooks
I tend not to get too philosophical, but the above quote has always resonated with me. There’s nothing wrong with wanting more, but being content with your current situation ensures that you’re not trying to keep up with the Joneses.
That being said, in order to want what you got, you need to know what you got.
According to Credit Karma, 51% of Americans – and 61% of American women – don’t know how to calculate their net worth.
Perhaps more disturbing, 31% of Americans have a net worth of zero or less and 30% of Gen Z (people born between 1997 and 2012) cares more about celebrities’ net worth than their own.
I’ve kept a quarterly tally of my net worth for several decades, and it’s not because I want to bask in the glow of the numbers as they get larger, like a modern-day Scrooge McDuck.
I do it so I know where I stand if a big source of income suddenly goes away.
It’s happened to me before.
Early in my career, when I was working for a dot-com during the collapse, we came into work one morning, and our email stopped working. Minutes later, the head of HR came in and tearfully let us all go.
My son was 14 months old.
Since the Bay Area was the focal point of the dot-com industry, jobs were vanishing faster than wrinkles on a forehead in Los Angeles.
After that, I never wanted to be unaware of what my resources were – or, most importantly, how much income my investments spun off.
That’s why, whenever I run the numbers, I also calculate how much income the investments are generating. All of my dividends are reinvested, but if necessary, I could shut off reinvestment to provide income to pay bills.
The income column of my spreadsheet has always been what’s most important to me, and knowing my net worth gives me an idea of how much more income I could generate if I had to.
I strongly recommend going through this exercise at least once a year. You may be surprised what you find out. You might realize that your investments are not generating enough income, or perhaps you’ll be pleasantly surprised at how much income you are receiving. Either way, it’s good to know where you stand in case you need to boost that number.
If you’re unfamiliar with how to calculate your net worth, it is very simple:
- Add up all of your assets – your stocks, bonds, alternative investments, cash, checking account, crypto, even the equity in your house (though I strongly recommend being conservative when you estimate your home’s equity).
- Subtract all of your debts – your mortgage, auto loans, student loans, credit card debt, etc.
That’s it.
That’s your net worth.
When you’re looking at your brokerage statements, there is usually a line that shows you how much you’ve earned in dividends and interest that year. That will give you an idea of how much income your investments are spinning off. (Don’t include capital gains in this figure. You want to understand how much income you’re earning without needing to sell anything.)
Knowing what you have is vital for knowing how much you can invest and where. Do this simple exercise so you know what you’ve got and you can be happy with it.
Hopefully, next year you’ll be happy with a little more because you invested the right way.
I review my liquid net worth (assets I can convert to cash in a day or two) monthly to make sure all looks correct. That makes up a good chunk of our assets. I do not track the houses or cars very often. I also review my annual income from investments near year end while I am preparing to do my taxes. I am simply amazed by the amount of money we are bringing in. My wife saw my analysis and asked what’s this and I told her. The next words out of her mouth were “I have to go shopping.” Also, on a different topic, make sure you track your credit card expenses, I set it up so that all CC activity goes to my phone. I had two fraudulent charges one time that appeared, I called the store and they were able to nab the guy before he even left the parking lot. Got a new credit card as well.
Marc i really like your wise advice .. i just put down what i consider a lot of money on the company that you call the 29% returns company the(Texas Pacific Land Corp. with high dividends, but i was so very disappointed to see that this stock went down so much in the last month … do you know whey that happened or if there is something i should do other than wait it out for now? Thank you
Marc That’s great advice. Btw how do I get in on space x pre before the ipo! I don’t want to give Jeff brown your money.
Thank you for that rich thought this evening.
Hey Marc I did something spontaneously stupid this morning. I had wanted to join Jim’s Insider Trade group using the $511 credit paying only $1484 but found it would wipe me out in my checking account and at the last minute bailed. I wanted to bit that bullet, but decided to hold my little ground in the plus instead of zero.
And a few hours later, Jim emailed me ‘Peter Mi” did you make a mistake? Join me for three months so I spontaneously did and forgot about getting my car fixed, paying a few bills etc.
Thankfully, I was one time only forgiven by the powers that be and will get the money back into my debit account in 3 to 5 days.
I was so wanting to get that Ticker that quite possibly could make me a lot of money, if I had money to invest. But all the money I have to invest is already working for me at SOFi so I’ll have to be more careful, and not act before I have studied my actual sent worth. Thanks for your latest test. And I thank God for being a member of an honest group like paradigm press.
Whew, Peter M Richardson
I retired and have a guaranteed income. As for investments in case of a drastic turn down and need money from them I have put enough money in a reserve account separate not affected by market fluctuations to last me 5 years.
Marc perfectly stated it is income from net worth not equity. Something always happens. Plan for the worst hope for the best. IMHO
I’ve tracking net worth since shortly after the two towers – it was the only way I knew to guide my retirement planning and know if I was on track. Thank goodness I did as I eventually retired several years early.