There Are Two Parts To Your Budget Equation

Reasons to Add Fun Money to Your Budget

Many people only consider reducing their expenses when times are tight. But, there is only so much your budget can take in the way of belt-tightening. There are two sides to the budget equation. Another way to tackle the problem is to look at the other side of the equation. You can help your struggling finances by increasing your income as well. Understanding The Accounting Equation Or Budget Equation On the first day of an accounting class in college, the professor put the accounting equation on the board. It is an equation that drives the financial world. Assets – Liabilities = Equity. To put it another way in a budgeting aspect, your income – your costs = what’s left at … Read more

You Are Missing Several Key Assets When Tracking Your Net Worth

Calculating Your Net Worth

Calculating Your Net WorthYou’re missing a key part in your net worth calculations! You’re richer than you think you are. I’ve been critical of J Money’s monthly net worth updates for years now. Every month, he keeps us up-to-date on his net worth increases on his popular personal finance blog, Budgets Are Sexy. It makes me depressed about my own lack of large numbers when it comes to my net worth.

Don’t get me wrong. I’m not mad, and I know that I shouldn’t be comparing myself to others. We’re all in separate places with different goals and situations in life. But, I can’t help but continue to dwell on J Money’s net worth updates when he posts them every month.

But, this time, I think I’m onto something. I think that he’s forgetting something, and subsequently so am I. We all might be forgetting something in our calculations. We all might be richer than we realize! Are you making this key mistake when you calculate your net worth? I bet you are, and you’re not alone.

Maybe there is more to these net worth numbers and the simple calculations of our assets and liabilities. I think J Money is unrepresenting his net worth and leaving money on the table. I think we all are. Our net worth numbers can be even larger, and maybe some of us are closer to J Money than we think.  

You’re Leaving Out a Few Assets

Calculating Your Net WorthWhere do you draw the line on what is an asset? We all understand thanks to J and his posts that to calculate your net worth, you simply subtract all of your debts from a list of assets like your home, investments, and your cars.

But, we are leaving out key assets to our calculations. It struck me when I had an argument with my friend Blake a few months ago whether or not your cars deserve to be included in your net worth as an asset. It does! I agree with J in that respect. My friend was leaving out his cars as an asset, but he was surely including his car loans in the list of liabilities. This greatly underestimated his net worth. 

So, that got me thinking about other assets that we typically do not include in our net worth calculations. I think that we are a little better off in our wealth than we all think.

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The Only Two Numbers You Should Measure in Your Finances

The Only Two Numbers You Should Measure in Your Finances

The numbers that you monitor with your finances matter.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. Thos 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?

Measure Your Finances With Two Numbers

You Should Measure Your Net Worth

You should know how much you are worth. You should keep track of this number every month. You should have it written down and should compare it to the previous month’s outcome. How did your investments do?

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