I Got the Net Worth Blues

According to the "experts", calculating your net worth is supposed to be a good exercise in order to take a snapshot of where you stand financially.Calculating your net worth is pretty easy. You add up all of your assets (the value of your house, car, investments, jewelry,...) and then you add up your liabilities (what's left on the mortgage on your house and other debts). You then you subtract your liabilities from your assets to get your net worth.

I really don't like looking at my net worth because it doesn't look good. I actually have a negative net worth. It's not fun admitting that especially because I'm usually really confident about my finances, but my net worth is part of my financial package so I must face it. My situation is that I owe almost as much as my house is worth and I have many thousands of dollars in student loans. Normally I would say my net worth isn't that dyer because it's only about a thousand in the negatives, but who am I kidding? I ran across a formula in the book The Millionaire Next Door that helps determine what your net worth should be. Here's the formula:

Net worth = your age times your income, divided by 10

After plugging in my numbers I felt sick to my stomach because the number was well above $100,000! I knew my net worth wasn't that good but I didn't know it was that bad! Ugh. Now, I'll try not to dwell on the disappointment of being so far behind because I know the purpose of this exercise isn't to make me feel bad, it's to put things in perspective. It's another motivator to GET OUT OF STUDENT LOAN DEBT AND PAY DOWN THE MORTGAGE. So next time I start to get sloppy about paying down my debt and keeping my spending under control, all I'll need to do is take one glance at my pathetic net worth to slap me into shape.

Photo: stevendepolo, flickr