Ronnie Lee, who is a businessman and author, discusses the importance of building up your net worth for financial success in his latest book, Know Money No Problem (ISBN 978-1952263583). The book serves as a guide to wealth acquisition and management, especially focusing on household finances. Today, average earners struggle to manage money with their income. But with Lee’s guidance, they can escape their unstable financial state to a more stable one.
In the book, Lee defines a person’s net worth and provides effective strategies to help readers start building up their net worth today. He shares his personal struggles and experiences, detailing his journey to achieving financial success. Throughout Lee’s childhood, he witnessed his parents make financial mistakes that had an impact on the whole household and their future. He learned about money management because he refused to make the same mistakes. Lee worked hard to earn money and built up his net worth. Now, he owns several well-established businesses. According to Kevin Mercadante, here are a few reasons why your net worth is important:
· Net worth is the most accurate measure of wealth. Wealth is what is left over after all of your bills are paid — and that’s precisely what net worth is all about. There’s no way to know exactly how wealthy you are without knowing what your net worth is.
· Tracking your financial progress. Since net worth is a specific number able to be tracked with precision, it enables you to measure your financial progress from one month or year to the next. Growing net worth is the best sign you’re moving forward; a decline in net worth means you have more work to do.
· Moving the financial focus beyond income alone. The concepts of wealth and prosperity are often grouped by income levels. While this measure has some value, it doesn’t take into account expenses, taxes, or other specifics. Even if your income is growing, if your net worth is flat or declining, your financial situation may not be improving at all.
· Avoids over-emphasis on asset value alone. Some people focus almost exclusively on the value of their assets as a measure of their personal wealth. For example, they may proudly proclaim $250,000 in assets, while ignoring $200,000 in debt. It is not the size of either number that counts, but rather the difference between the two.
· Puts your debt level in a proper perspective. In a perfect world, where no economic problems plague our lives, we should all be debt-free — but that’s not quite the way life works. A large debt number can seem scary, but if it is more than offset by a large asset position, it’s not nearly as bad as it looks. For example, if you have $50,000 in debt — and $250,000 in assets — your debt level probably isn’t extreme.
· Net worth can be important when applying for a loan. Since net worth is the best measure of overall financial strength, lenders are often interested in knowing what it is in determining whether or not they will approve you for a loan.
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