Comments on: Net Wealth Mindset | Discover A New Way Of Thinking About Money

By: Scott@Forex Robot

Scott@Forex Robot — Mon, 29 Mar 2010 16:08:54 +0000

Wow this is definitely a mind blow. It’s not about how much money you have, but also about the cost of the things that you want. That’s what really defines your net worth… very interesting.
.-= Scott@Forex Robot´s last blog ..Compare Forex Trading Software =-.

By: RJ

RJ — Mon, 22 Mar 2010 18:35:19 +0000

Good luck Amy!

By: Amy

Amy — Wed, 17 Mar 2010 21:33:33 +0000

Thanks so much for your post, “It’s not what you make it’s what you keep.” is so true. I really enjoyed your breakdown.. it’s given me renewed incentives to get my debt reduced!!
.-= Amy´s last blog ..The A to Z’s of the Wedding Cake Topper World =-.

By: Early Retirement Extreme

Early Retirement Extreme — Tue, 16 Mar 2010 17:01:16 +0000

I use a similar gauge except I divide by monthly expenses * 300. In this case, if you wealth > 1, you are financially independent. In terms of negative net wealth, the argument is similar to return on equity and return on asset calculations. If the denominator is small, the number can be severely inflated and if the numerator is negative, the number is meaningless. Ratios make it possible to compare things of different sizes but comparing someone with a negative networth and positive networth by simple ratios is like comparing apples and oranges.
.-= Early Retirement Extreme´s last blog ..How to win a sword fight =-.

By: terry

terry — Mon, 15 Mar 2010 16:15:25 +0000

And it doesn’t matter what you spend if you live on a minimum wage income.

All the frugality in the world won’t make you wealthy.

By: Brittany Noelle

Brittany Noelle — Wed, 03 Mar 2010 16:11:18 +0000

Thanks for the great article. For me, learning about finance can be intimidating, but your articles are always fun and easy to understand. Thanks again!

By: RJ

RJ — Tue, 02 Mar 2010 15:59:56 +0000

@Mike

I never thought of it that way. Thank you for clarifying.

You’re right. You can’t have a negative net wealth. It must be zero.

By: Mike

Mike — Tue, 02 Mar 2010 12:12:55 +0000

Thanks for the reply RJ! Let me clarify though… with a “real” example – let’s say RJ has net WORTH of +50,000 (nice work!)… Mike unfortunately is socked with student loans giving him -50,000 net WORTH. They both have the same average daily expenditure, let’s say $100 per day. That gives a net WEALTH of +$500 for RJ, and (-)$500 for Mike. In order for RJ to increase his net wealth, he miraculously decreases his daily expenses to $50 giving him a net wealth of $1,000 … Mike sees this progress and follows suit… however, he somehow ends up with (-)$1,000 NET WEALTH … he’s now “worse” off than he started… so he INCREASES his daily expenses to $200 per day (living the high life) and presto, his net wealth has now “increased” to only (-)$250. . . .

Does this make sense? I like the equation logically when assets>liabilities, but when you get into “negative net wealth,” I really like it The more I spend the richer I get? Help me if I’m missing something! Thanks again for the great site!

By: RJ

RJ — Mon, 01 Mar 2010 20:31:18 +0000

@Mike – Thanks for the great comments.

I don’t see a problem to having a negative net wealth. You’re hiding reality if say anything else.

Income isn’t taken into account in your net worth either. It’s why, what’s you keep is more important then what you make.

By: Mike

Mike — Sat, 27 Feb 2010 13:16:26 +0000

Interesting way to think about net worth / wealth. But question – is net wealth an established, defined way of looking at one’s own economy? I mean, it looks like from the equation it works fine so long as your assets outweigh your liabilities, but if you have greater liabilities, then it’s probably better just to say you have “0″ net wealth – otherwise you run into the problem of having “less negative” net wealth the greater your monthly expenses! Also, income is not taken into account in this equation (except in terms of assets), not sure if that poses a problem. Your thoughts?