Personal Finance

We always hear about the fabulously luxurious lives of wealthy folks with a reportedly high net worth, but income is just one of many factors involved in net worth calculations. Surprisingly, someone who drives an older car, lives in a modest home, and dines at average restaurants once per week or so could very well have a higher net worth than the guy dropping off his flashy new BMW convertible at the valet of a resort to spend an evening wining and dining with friends. How can that be?

According to Investopedia, personal net worth is defined as “the amount by which assets exceed liabilities.” Since income isn’t always an accurate predictor of net worth – there are plenty of high earning poor people who live paycheck to paycheck or have no emergency savings fund despite earning an upper middle-class income – looking to the assets-to-liabilities ratio in net worth calculations offers a much clearer picture of a person’s financial situation. If you haven’t calculated your own net worth in a while, then here are some tips for getting started.

You need to know your net worth. I’m not talking about calculating your net worth every week with the changing fluctuations in the stock market. But, once a quarter you need to sit down and take stock at where your family is financially.

Like a business balance sheet, your net worth lists your assets and liabilities in one location. Take your assets, subtract all of your debts, and you will be left with your net worth. Many of us are far too often left with a negative value for our net worth, as we owe more than our assets can cover.

I can remember my first day of undergraduate accounting class. The professor put the fundamental accounting equation on the board. “Assets – liabilities = equity” – You need to know your net worth by understanding this basic equation.

How Do You Calculate Your Net Worth

What do you measure in your life? Do you count calories? Do you count how many visitors check out your website everyday (or every hour if you are me)? You should be counting things in your life.

Counting implies that there is a goal in the end that you are counting towards something in the end. Those with a goal have been shown in studies to ultimately be more successful in life.

A study of Harvard MBA students in 1979 who were followed for ten years found that the 13% of the class who had made goals for themselves were earning, on average, twice as much as the other 84% who had no goals at all.

In fact, 3% who had written down those goals were earning, on average, ten times as much as the other 97% put together. What you measure in life matters. It draws our focus to it like a laser. So, what are you focusing on with your money?

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When we hear news stories about how the lottery has surpassed the $100 million mark, it’s fun to dream about what we might do with that kind of money if we won (even if we don’t end up buying lottery tickets!). Buying a mega-mansion, vacation homes, luxurious trips around the world, private jets, and going out to fancy restaurants are typically at the top of the list, though some people decide to donate most of their winnings to causes and organizations that are near and dear to their hearts.

What You Should Do Immediately After Winning the Lottery

If your lottery dreams become a reality and you suddenly have a ton of money coming in (whether it’s $25,000 or $25 million), here are some things you should immediately do to avoid financial destruction like some lottery winners of the past:

Hire Professionals to Protect Your Funds

Hiring a certified financial planner on from the moment you find out you won should be a requirement for any lottery winner. These folks are trained to help you make important financial decisions like taking the lump sum amount or annual payments, how to invest it, how much you can/should donate to a nonprofit for maximum tax benefits, and how much your monthly budget can handle without blowing through your money too quickly.

Building a financial team should also include an accountant (you’ll definitely need some help with IRS-related concerns) and a lawyer (to help you navigate any legal concerns along the way). Yes, these folks charge quite a bit of money for their services, but you’ll be in a much better position to successfully manage your money than if you try to go it alone.

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The following is a guest post by Kelly Kehoe. If you’d like to submit a guest post to Money Q&A, check out our guest posting guidelines.

Credit and debit card fraud happens all the time, but if you’re traveling abroad like I did recently, it can be a nightmare to deal with. After withdrawing money from an ATM just once in Barcelona, I received an email two days later about a withdrawal that had posted to my account amounting to $540.

Another transaction from the same vendor with the odd name (it was Russian, according to my frantic Google search) was pending for $285. I immediately emailed my credit union (it was 9pm back home) and within 12 hours, my ATM card was completely shut down.

While I was grateful that no other fraudulent charges would show up, I was now in trouble because I had zero access to my bank accounts (except online), no cash (a lot of places I went to in Europe, especially Germany, were cash-only), and 8 more days left of my trip with just a credit card to help me pay for expenses.

How to Get Cash After Your Debit Card is Stolen

To save you a headache and anxiety of confronting the same problem I did, here are some things I learned while dealing with debit card fraud abroad:

What to Do When Your Debit Card is Stolen

The Federal Trade Commission outlines your legal rights in cases of credit or debit card fraud. If you’re lucky like I was – even though I didn’t feel “lucky” at the time! – and you still have your debit card in your possession, then you won’t be liable for any of the fraudulent charges as long as you report them within 60 days.

If your debit card was lost or stolen, however, you could be liable for up to $50 of the charges if you notify your bank or credit union within 2 days. If you notify them after 2 days but before the 60-day mark, then your liability increases to $500. If you wait longer than 60 days, then you could be liable for the entire amount of fraudulent charges. Even if you have to pay a couple dollars to call your bank from abroad, it’s worth it to report the charges as early as possible.

Once you report the fraudulent charges, your bank or credit union will likely email you a dispute form to fill out and return (ask a representative how long you can wait to submit this if you don’t have access to a computer or printer while traveling). Depending on your financial institution, you could get your money back within 48 hours to 3 weeks, on average. To ensure other aspects of your personal identity are safe, keep a close eye on your credit report for the next couple months as well.

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