The Secret Behind Your Financial Numbers

Where are you financially?  Are you progressing or regressing? Do you know your net worth? Your net worth is simply the difference between the dollar ($) value of what you OWN and the dollar ($) value of what is OWED. The secret is in the details.

Let us take a look at two friends, Andrew and Thomas, who work at the same company, are the same age, and purchased homes and vehicles at the same time, but earn different incomes. Despite Andrew earning less and owning tangible things of lesser value, his net worth is greater!  How?  Let us find out the secret behind these numbers, that is, the numbers that make up their net worth.  Also take the time to calculate your net worth and find the secrets that can be uncovered by your numbers too.

There is an inexhaustible list of things that the numbers reveal; here are a few points, and I know you will find others. These figures also share some great lessons.
•    Invest more: Andrew was able to invest more, because he had lower loan repayment amounts.  The bonus is that even if he earns the same rate of return on his money as Thomas because he has more, the dollar value would be greater.
•    Purchase more assets: Retail goods like clothes and jewellery etc. are not included in the calculation of your net worth, unless these are collectors’ items.  Therefore spending on these things will not increase your net worth.  Instead it will lower your net worth, as you spend money that could be otherwise invested on assets such as stocks, real estate and bonds. 
•    Maintain an emergency fund: An emergency fund ought to cover 3 to 6 months of expenses. Based on Thomas’ current expenses, in the face of an emergency, he may be in danger of suffering further loss, if he has to sell any of his assets below the initial purchase price of those asset, in addition to the fees that such sales may attract such transfer taxes (on real estate) and Jamaica Central Securities Depository (JCSD) fees and other fees (on sale of stocks). 

What secrets are your net worth figures telling you?  If it whispers that you need some assistance in boosting your net worth, we will listen and share the best solution(s) for you.  Please call us at 876-998-5662.

 

Written by Michelle Sinclair-Doyley, manager, client financial education