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Money Chats For Moms: Understanding Our Net Worth

October 18, 2018
net worth

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Hello to all of our beautiful mamas! We hope you’re having an amazing week. This post is near and dear to our hearts because it is a fundamental element to a secure future. Many mamas already have their financial ducks in a row, but if you don’t, or if even talking about money stresses you out, then this article is for you. We’re going to figure this out together. Because those little ones of ours depend on a strong financial future, led by our awesome mama example. Let’s dive in.

So what is net worth anyways?

Net worth is essentially your total assets (all the things you own that are worth something) minus your total liabilities (any money you owe or still owe on something you own – like your house).

Why is net worth important?

It’s impossible for us to know where we are headed financially unless we clearly understand where we are starting from. By calculating our net worth and getting a crystal clear financial picture, we know exactly what work we need to do to reach our future goals.

Maybe you want to save for a downpayment on a house. Or perhaps you’d like to help pay for some or all of your kids’ college tuition to reduce their debt load. Or maybe you just want to feel secure when you reach your later years in life — knowing that there is enough to support you without having to work full time when you’re sixty. By calculating your net worth on a regular basis, you will get to know your number and get a clear idea of whether it is headed in the direction you want it to be. And even further, that number can help you redefine your direction.

How do you calculate your net worth?

The best way to do this is to make a list of all of your assets (things you own that are worth value). The most common assets included in net worth are your home, car, any savings and checking accounts, investment funds, retirement funds, cash, etc.

Next, make a list of any debts owed such as the outstanding balance on your mortgage, unpaid credit card balances, student loan debt, outstanding car payment balances, medical bills, etc.

Here is a net worth example from Kelly — a mom of two kids. Kelly is thirty-five years old and lives in a moderate cost of living area. She and her spouse own their home and have a four and eight year old. Let’s break down her family’s net worth:

Home Equity (home’s present value minus the remaining mortgage balance): $80,000

Retirement Savings (401K, IRA’s): $125,000

College savings: $70,000

2 Vehicles (current value of both minus the debt remaining on both): -$10,000

Credit card debt: -$5,000

Student Loan debt: -$55,000

If you tally up the above numbers, you will see that Kelly’s family’s total net worth is: $205,000. Kelly’s family actually has $275,000 in assets but when you include the $70,000 of debt, her total net worth is $205K. Here is a free printable worksheet that you can use to calculate your household net worth.

Since Kelly is ambitious and wants to know how her household net worth compares to others in her age range, she happens across a handy calculator. All she has to do is type in 35 as her starting comparison age and 35 again as her ending comparison age. Then she types in her net worth number with no dollar signs or commas – just numbers. She discovers that she ranks in the 76.71% for networth for her age group. 

Whether we are starting with a positive net worth or we are currently in the red, it is absolutely possible to make changes today that can help us reach our goals. Everyone starts from a different place and has different life experiences. Some of those experiences start us out ahead of others. And some put us in last place. But it doesn’t matter where we currently are. What matters most is making the decision right this second to set future financial goals and start taking immediate action to reach them. We are all capable of achieving financial security. It doesn’t take genius, incredibly high income, or wealthy parents to get us to where we we want to go – although admittedly those things help.

As Angela Duckworth states in her amazing book Grit, what any goal requires (no mater how lofty) is just passion and perserverance to get where we want to go – the choice to be resilient and hardworking and know in a very deep way what we want. Thank you Angela for those incredible words of wisdom.

So mama, let’s get our Grit on. Here is that free worksheet again to help you along on your positive net worth journey. And as always, let us know if you have any questions.

Wishing you mucho financial success!

XOXO,

Related Post: Money Chats: What Does Financial Independence Look Like For Moms?

Related Post: Money Chats: Money Mindset For Moms

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