Now that the fundamentals of REIR investing have been mapped out, I want to focus on: "net worth." This is the heart everyone's financial health.
Net Worth is your assets minus your liabilities. In other words, if you sold everything you owned, and paid off every debt you've got, you would end up with this much money. A high net worth is what truly separates the rich from the rest of us, not the amount of income we get from working. I will explain this later...
I have been keeping track of my personal net worth for almost 2 years now. This has been very beneficial for me, in that I have been able monitor the direction of my finance situation. I encourage everyone to create a net worth spreadsheet using Microsoft excel or open office (free!), and update it every month.
There are many websites that can guide you through the process, but here is a screenshot sample of a net worth spreadsheet in open office.
This individual has liabilities totaling $62,500
This individual's net worth is $3,600
When you calculate your net worth for the first time, you may discover you have a negative net worth! This could be a great wake up call for you, like it was for me. I followed my REIR strategy and updated my net worth monthly. I noticed my liabilities dwindled and my net worth began to soar, even without adding assets. Therefore, my net worth was heading in a positive direction, which may have been unnoticeable without my net worth spreadsheet.
Visit CNN Money's Net Worth Calculator to see how you stack up vs. others your age and your income. Very neat. Leave comments or messages on your thoughts.