“Don’t make things up; don’t exaggerate. Just be up-front. If you don’t know something, be very skillful at finding it out, and that’s good enough. And if you make a mistake, admit it—immediately.”
-Greg Smith
Hello, friend!
Welcome to Journey to Millions!
In my previous article, I have shared with you the First Step to Your Journey to Millions which is “knowing where you want to go” or Setting Financial Goals.
Financial goals inspire you to do good things, try new things, and finish things that you have left undone. They motivate you to aspire for something big, for something better, for something that makes you want to get up in the morning and do some awesome work. But, of course, you shouldn’t stop at merely “dreaming” about what your life could be or should be.
With your clearly set financial goals, you can surely go places, but not without discovering “where you are now.”
Where are you now?
When I was still starting to learn my way to millions, I came across books that required me to compute for my net worth.
Back then, I have always felt negatively about taking note of how much I was making, how much I was spending, and how much I end up saving at the end of every month. I found the task too tedious and unflattering, so, for years, I just pushed through with my financial education without being in sync with my financial realities.
Every single morning, I read my goals aloud. I learned this trick from many personal development gurus who subscribe to the law of attraction. They said that if I focus on my goal hard enough, in time, it will naturally come.
I also read my goals at night before I go to sleep. Gurus said it’s another form of programming your subconscious mind to attract the things you want and need.
Lastly, whenever I had time, I also rewrite my goals on my “Dreams Notebook” over, and over, and over. Again, gurus said that handwritten dreams are like magnets. They help attract dreams faster. So, the more I write, the more magnets I create.
But of course, as you might have guessed, no matter how focused I was on my goals, I still failed miserably at achieving them.
Since I didn’t perform an honest assessment of my financial life, I was completely unaware of my strengths and weaknesses. Even if I had my goals set, I wasn’t able to channel the financial blessings I received to meet my priorities, my goals. I ended up frustrated and disillusioned.
But one day, I mustered the courage to take note of everything that affects my financial life and eventually saw where I was actually standing.
Are you standing on high ground or are you under water?
The internet can be of excellent help to you when trying to compute for your net worth. Instead of recommending books for this purpose, I am recommending that you visit some of my trusted online resources.
By the way, if in case you are wondering what a “net worth” is, it’s simply a monetary value that describes how wealthy or how poor you are. Interesting? Then go and skim through these valuable resources.
Here are the links to The Complete Guide To Calculating Your Net Worth by Investopedia.com:
- The Complete Guide To Calculating Your Net Worth: Introduction
- The Complete Guide To Calculating Your Net Worth: Important Terms
- The Complete Guide To Calculating Your Net Worth: Why Net Worth Is Important
- The Complete Guide To Calculating Your Net Worth: Making Accurate Estimates
- The Complete Guide To Calculating Your Net Worth: Calculating Your Net Worth
- The Complete Guide To Calculating Your Net Worth: What Your Net Worth Means
- The Complete Guide To Calculating Your Net Worth: Building Your Net Worth
- The Complete Guide To Calculating Your Net Worth: Conclusion
“Calculating your net worth helps you figure out where you are financially at this point in time.”
-Jean Folger
If you prefer to compute for your net worth online, without having to use paper and pen, you can try using CNN’s Online Net Worth Calculator. It’s free to use and just requires you to input the values on the worksheet and press the “Calculate” button to view the results.
Worry not if you’re calculating for money in Pesos, Dollars, or Euros. The default dollar sign in the calculator is negligible. Just don’t mind it, and don’t even waste your time converting your money into dollars (if it’s not yet in dollars). What matters is the accuracy of the values you input in the calculator, so please think and type carefully.
Reflecting on your net worth
Thomas J. Stanley and William D. Danko, authors of the New York Times bestselling book entitled The Millionaire Next Door, said that there is “another way of defining whether or not a person, household, or family is wealthy” and that is based on one’s expected level of net worth.
They said that…
“A person’s income and age are strong determinants of how much that person should be worth. In other words, the higher one’s income, the higher one’s net worth is expected to be (assuming one is working and not retired). Similarly, the longer one is generating income, the more likely one will accumulate more and more wealth. So higher-income people who are older should have accumulated more wealth than lower-income producers who are younger.”
Given these assumptions, they have come up with a formula for determining one’s expected net worth.
“Multiply your age times your realized pretax annual household income from all sources except inheritances. Divide by ten. This, less any inherited wealth, is what your net worth should be.”
Now, it’s time for you to discover how well you are doing financially by computing for your expected net worth and comparing it with your actual net worth.
If you are having a hard time figuring out how the formula works, you can simply try this Wealth Calculator which uses the exact formula that Stanley and Danko has created.
Are you a UAW, AAW, or a PAW?
For people like you and I who want to become millionaires, our goal is to become a PAW or a Prodigious Accumulator of Wealth. Never mind if you are an Under Accumulator of Wealth (UAW) or an Average Accumulator of Wealth (AAW) today. What matters is that from this moment on, you aim to be a PAW every single day. (Please note that the terms UAW, AAW, and PAW are terms coined by Stanley and Danko.)
PAWs are said to be “builders of wealth–that is, they are the best at building net worth compared to others in their income/age category. PAWs typically have a minimum of four times the wealth accumulated by UAWs.”
If you want to know how Stanley and Danko describe PAWs in detail, I invite you to read their awesome book today. Somebody bold enough to dream of becoming a millionaire ought to be bold enough to invest in his financial education too, right?
Go and grab a copy of The Millionaire Next Door now and see how PAWs rise from the ground up. I don’t care if you buy, borrow, or steal the book. But of course, you know that stealing is bad and is punishable by law, so I hope you either buy or borrow the book instead.
UAWs and AAWs who are cool with what they have or don’t have
If you are an Under Accumulator of Wealth or an Average Accumulator of Wealth and wishes to stay the same forever, then you don’t have to read the next few paragraphs below. If you think that making changes to your current earning and spending habits would be too burdensome, then please leave this website now. I don’t think I can help you with anything anymore. You can just keep doing what you’re already doing with your money and expect to be forever broke and forever “hoping” to be truly rich.
UAWs and AAWs who want to be PAWs, Congratulations!
If you are an Under Accumulator of Wealth or an Average Accumulator of Wealth who wants to be a Prodigious Accumulator of Wealth, I applaud you! Today, you have just gotten to know yourself better, and the more you know, the better chance you have at making giant leaps of improvement in your financial life. Remember, knowledge that is put to good use is power!
So, from “knowing where you are,” we will be shifting our energies to “knowing how to get to where you want to go.” This also means “knowing what to do to become full-pledged PAWs” and reaching your financial goals.
In my next article, you would be discovering how any committed person, “no matter where one begins,” can turn himself/herself into a confident, happy, and secured Prodigious Accumulator of Wealth.
For now, I invite you to share how you feel or think about discovering your net worth. Did you expect your actual net worth to be higher or lower? How about your expected net worth? Did you anticipate being categorized as a UAW, AAW, or PAW? Why or why not?
Also, if you have friends or loved ones who are yet to discover their actual net worth and expected net worth, feel free to share this article with them. You just might inspire them to be PAW, just like you!
Until my next post.
Love,
Edel
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Image taken from prioritymoving.com
Edel is a Filipino Personal Finance Advocate, a work-at-home wife and a graduate of the University of the Philippines.
Elvin is a loving husband, an MS Excel Guru and the one who enjoys lurking at the comment section to answer readers' questions.
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I compulsively list everything, too, from net worth to every day spending and all. To be able to know where you are, how much you are spending and how much you are saving are crucial to building your financial powerhouse.
One of the great books I read is The Millionaire Next Door! It opened my eyes that people who have Ferrari and the likes don’t necessary mean they are rich.
I aspire to be “the millionaire next door type”, who lives simply without flashy things and without the neighbors knowing how much you are really worth! HA!
Great blog
Hi PINASforGOOD,
Thank you for visiting our site. Just like you, we also aspire to be the “millionaire next door” type. Yung tipong walang nakakaalam pero millionaire pala.
Iniisip nga namin, posible kaya yun?
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