Raising a Millionaire - Learn the Language

\| Home \| Search \| Contact Us


	Goals, Attitude, Desire

	Continuing Education

	Giving Back

	Recommended Resources

	Retirement

	Credit Management

	Taxes

	Brokers/Online Trading

	Travel

	Financial Calculators

Wealth Management Learn The Language
You want to create personal wealth, right?

To embark on a personal wealth-creation strategy it is important for you or your child to learn the language of wealth creation. The first lesson is to understand the meaning of assets, liabilities and net worth. They make up this very important formula:
Assets - Liabilities = Net Worth

A wealth-creating asset is a possession that generally increases in value or provides a return, such as:

A savings account.
A retirement plan.
Stocks and bonds.
A house.

Some possessions (like your car, big-screen TV, boat and clothes) are assets, but they aren't wealth-creating assets because they don't earn money or rise in value. A new car drops in value the second it's driven off the lot. Your car is a tool that takes you to work, but it's not a wealth-creating asset.

A liability, also called debt, is money you owe, such as:

A savings account.
A retirement plan.
Stocks and bonds.
A house.

The market value of a home is an asset; the mortgage, a liability. Let's say your house is worth $120,000, but your mortgage is $80,000. That means your equity in the home is $40,000. Equity contributes to your net worth.

Net worth is the difference between your assets and liabilities. Your net worth is your wealth.

To calculate your wealth use the following formula:
Assets - Liabilities = Net Worth

Creating a balance sheet listing all your assets and all your liabilities will help in determining your true net worth. It is important to list your wealth-building assets first.

Click here to view a sample Balance Sheet.





Copyright SimpleSoft, Inc., . View the legal notice and privacy statement.