In this episode of the Cashology Podcast, Justin welcomes Keri Mallory, Branch Manager at FNBO, for an insightful discussion on a foundational financial concept: net worth. Keri breaks down what net worth is, why it’s important, and how to calculate it by understanding your assets and liabilities. She also shares real-life examples to show how tracking your net worth can serve as a financial compass, helping you stay on course toward your goals.
Learn how to assess your financial health, set achievable savings goals, and avoid common pitfalls like focusing too narrowly on one aspect of your finances. Whether you’re looking to start your financial journey or refine your strategy, this episode offers practical advice to help you take control of your net worth and plan for the future.
Listen here and follow @CashologybyFNBO® on YouTube for more!
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You're listening to the Cashology
Podcast by FNBO,
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a place dedicated to helping you
become more financially savvy every day.
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It's a little like school,
but your only homework is living your best
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financial life.
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I'm your host,
Justin, and class is now in session.
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Welcome back to the Cashology podcast,
a place where we dive
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deep into personal finance to bring you
actionable insights and real life wisdom.
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Today, we're unpacking a concept
that might seem complex, but
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it's fundamental to your financial health,
and that's net worth.
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If you're like me,
you've probably at some point googled
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the net worth of billionaires
and celebrities.
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But what about your own net worth?
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I know when I threw my name into Google,
I did not like what I saw.
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Had nothing to do
with net worth, by the way.
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So, do you know what net worth is?
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Do you know why
it's important to understand it?
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Do you know how to use it?
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How to calculate it?
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Well,
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I didn't know the answers
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to these questions,
so I went found an expert.
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And believe it or not, it's my first
repeat guest on the Cashology podcast.
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That's Keri Mallory.
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Keri joins us again
and gives me a good schooling.
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And what net worth is how
to think about it and how it can become
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and be leveraged as an important tool
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as you navigate your financial journey.
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So I really hope
you enjoy this episode with Keri Mallory.
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All right.
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Well, welcome back, Keri.
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Thank you so much for being our first,
or at least my first repeat visitor.
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I guess it didn't scare you too much.
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KERI
Well thank you! No!
You were super fun!
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JUSTIN
Oh, good. I'm glad to have you back.
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And with net worth, I think some of
our listeners want to know about it.
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Can you tell us about what it is?
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KERI
Yeah, absolutely.
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How you come up with net worth.
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You take the difference
between the types of assets
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you have and your liabilities.
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There's three types of assets
when it comes to that.
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And that is liquid assets.
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Liquid assets are like cash.
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So to speak.
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Think of that cash in your wallet.
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Weekly accessible and bank accounts.
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You can usually access
bank account money pretty fast.
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Investment
accounts are assets like stocks,
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bonds, retirement accounts that we've got.
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These help
you build your wealth over time.
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So these assets,
they're going to be considered illiquid.
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JUSTIN
Make sense.
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KERI
Illiquid because they are quite easy to access
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like cash in your wallet
and can't be used for immediate needs.
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Other things that we consider assets
to help determine
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your net worth are physical assets.
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Those are going to be things
such as your home, your car,
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or other personal property that you own.
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These are going to be,
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valued at whatever
their current market value is.
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So say
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somebody was going to sell something,
so to speak, and kind of get appraised.
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What's it going for at that time
in the market?
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And with that,
you're going to get a realistic picture
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of what your net worth is
when you take those assets, whether liquid
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or illiquid, and you subtract out
any liabilities, that you have.
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JUSTIN
Got it.
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So can I ask really quick.
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So I want to like double click on,
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physical assets.
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So like you were saying home
car, personal property.
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This is really how
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minute, I don't know
if that's the right word.
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Can you get with like, an asset.
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Is it typically, I think when I hear assets,
I think of home, car.
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But could, like, my iPad be considered
an asset?
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Is it like, anything that you can sell
or is there.
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KERI
Yeah!
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JUSTIN
When we talk about net worth
like in general,
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it's usually these kinds of things.
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KERI
No, no, no, you're absolutely right.
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That would tend to fit
in that category of personal items
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if it has any value to it.
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I mean, you could take that to pawn shop.
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JUSTIN
Yeah.
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KERI
And you can probably get cash for it.
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I mean, Apple even will consider
giving you, you know, credit,
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JUSTIN
Sure.
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KERI
towards the purchase of a new item,
if you return something.
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So that is absolutely considered an asset.
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There's still value to those items.
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JUSTIN
Got it.
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But we probably keep it a little
higher level when it comes to net worth. Right? Like.
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KERI
Yeah, absolutely.
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Especially when we're trying to determine,
you know, for
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from a financial, perspective with what
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we're trying to do to help people plan
for retirement for their future.
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Absolutely.
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We're going to be talking
high value stuff, yeah.
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JUSTIN
Makes sense.
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KERI
To determine those values.
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Yeah!
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JUSTIN
Got it.
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So you mentioned assets
and then you touched on liabilities.
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Liabilities is kind of a big word.
What's a liability?
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KERI
So liabilities are going to be any debts
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some financial obligations that we owe.
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Some examples of these are going to be
things like student loans,
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a mortgage, car loans
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any balances we're going to owe on credit
cards.
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Things like that.
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So anything you owe money on
is going to be considered a liability.
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JUSTIN
It totally makes sense.
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So we have like these two buckets
of dollars.
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These two buckets of things.
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We have assets and liabilities. Keri,
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how do those two come together
for net worth?
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KERI
Yeah, what you want to do with those is
you want to calculate out your net worth
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to see if you're on track
to a positive number, of course,
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and having a goal in
mind of what you want to achieve
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and how you determine your net worth
is that you're going to list out
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all of your assets, and you're going
to figure out what their current value
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is, and then you're going
to do the same thing for your liabilities.
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List out all your liabilities
and how much you owe for those.
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Then what you're going to do
after you figure that out is
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you're going to subtract
those liabilities from the assets,
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and boom! You’ve just calculate
your net worth.
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It's like kindergarten all over again.
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JUSTIN
Very simple math, just
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addition and subtraction.
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KERI
Yup! Absolutely.
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JUSTIN
So you get this number
and so why is it important like, right.
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I've been working personally
on it on a better budget
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and kind of like sticking to that,
keeping an eye on my credit card debt.
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So what is, why is it important
to track your net worth?
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KERI
Well because you really always
need to know where you're at and the
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you know you're going to set goals
when you go to retire or you know
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you're going to have expenses
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coming up, you're going to need to know
where that money comes from.
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And so in order to eventually retire
and pay for everything, you know, in
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the future, you're going to need to know
how you're going to get there.
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And so you're going to have to establish
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what are you making
now, how what are your assets?
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You need to purchase anything.
What do you owe?
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When should you pay that off?
And how should you manage all of that
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in order to get where you need to go?
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So you want to keep an eye
on all of those things
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because they're going to impact,
obviously, your future, your financial
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goals, changes in that are going to be
a quick wake up call to you also.
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To be like,
nope, I need to pay down that debt.
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I need to probably adjust
what I'm spending
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because looking at this now,
due to the change in the lifestyle
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or whatever might have impacted that
life change, you're gonna want to be sure
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you're still on track with your savings
and your investment strategy.
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JUSTIN
Got it. It's really interesting
because it's like a
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it's like a number
that just like, a whole lot,
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it's like a really big compass.
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KERI
Yeah.
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JUSTIN
Of kind of the direction
on your, savings financial journey.
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If you will.
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So can you
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walk, through an example
to help our listeners,
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to understand how impactful,
you know, tracking net worth can be?
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KERI
Yeah, absolutely.
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So at any point in time,
anytime you can do this,
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you could be working towards
a variety of different financial goals.
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Okay.
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This can be either whether you've built up
some credit card debt
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and your goal is to pay them down,
you might want to increase
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your emergency savings
fund, might be planning for retirement.
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You might be paying down your mortgage,
saving for your kid's college
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education, paying off medical bills,
managing a daily budget.
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There is a wide variety of things,
that, can go into that.
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So if you're focused on these goals,
kind of like an impact,
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you it's difficult to get a clear picture
of your overall financial well-being.
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It's easier to focus on one goal
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while you inadvertently are sabotaging
another goal.
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Sounds a little strange, right?
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JUSTIN
Fosure.
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KERI
Doing so could have a
null to negative impact on your net worth.
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So, for example,
let’s just kind of talk through it
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just to get that to make sense
a little bit.
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JUSTIN
Yeah.
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KERI
Let's say in January you calculated
your net worth to be $19,000.
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You have $20,000 equity in your home.
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You have $4,000 in savings,
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and you have $5,000 in debts.
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JUSTIN
Okay.
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KERI
So the equity, the savings, the debt
and the net worth.
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Now, let's say you made it your goal
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to increase that bottom total.
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The net worth within the next year
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by increasing your savings balance
to 5000.
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After paying all of your bills,
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you have $100 left each month
to put towards your goal.
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Within ten months,
your savings balance reaches
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$5,000 as it was sitting at 4000.
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Okay?
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JUSTIN
Yes.
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KERI
Congratulations.
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That one’s kind of an easy one. You did it!
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Also, during that time,
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take into account your home equity
that's now increased by $1,000.
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However, you inadvertently
increased your credit card spending,
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and now your total debt became $7,000.
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So in this scenario, only focusing
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on increasing your savings,
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but not keeping your credit card
spending in check had a null effect
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on your net worth.
Meaning you didn't increase your over
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financial health
by just achieving your savings goal.
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Does that kind of makes sense?
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JUSTIN
Yeah.
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So I was so focused on my savings,
wasn't paying attention.
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Kind of like what you're saying
I was in a vacuum,
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wasn't paying attention
to the spending on my credit card.
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Spending went up, my debt went up.
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KERI
Yes.
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JUSTIN
And so it was kind of like a null effect
of, well, we're still in the same place.
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They cancel each other out.
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KERI
Got to pay attention
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to all the categories
that are going to make up that net worth.
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And the easiest way to do that is,
of course, to constantly
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take a look at those numbers
and refigure it out.
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A lot can happen and change in the market
that's going to affect that
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net worth also.
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So you never want to lose focus
of the big picture.
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You're going to want to keep track
of all of them.
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JUSTIN
Totally makes sense in like what you were
just describing the net worth number,
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the combination of all of those things
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KERI
Yes
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JUSTIN
Takes all of those numbers,
gives you that bigger picture.
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KERI
Yes.
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KERI
So now let's consider another example
okay?
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JUSTIN
Okay, yeah!
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KERI
So now let's consider the same example.
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But assume that you were able
to keep your credit card spending in
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check this time, while you even managed
to pay down by $500.
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In this example, your net worth
now has increased by $2,500.
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You increased your savings while you,
simultaneously being mindful of your debt,
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had a positive effect
on your financial health.
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JUSTIN
Yeah.
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KERI
See how that works?
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JUSTIN
Yeah, so right.
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KERI
Keeping it all in check.
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JUSTIN
Yes, you have that home equity.
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We increased thousand over 21,000.
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You got a savings of $5,000.
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Paid off my debt.
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KERI
Yeah.
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JUSTIN
So $4,500.
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And now we're sitting that net worth of 21 five.
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Yeah,
I think, that's such a really good,
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example of how all of this comes together,
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where, right, it's that, to, is it.
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you can't see the forest
through the trees? Or
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what is it you're you're too close
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you don't see the bigger picture?
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KERI
Yeah.
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JUSTIN
That metric of your net worth provides
that view for you.
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KERI
Yeah.
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And you don't want to be careful
to have tunnel vision
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to one of the categories,
as we talked about in that vacuum.
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be sure
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we pay attention to every aspect of that.
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KERI
So, yeah, I think great
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example again, of how paying down debt
while
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also focusing on savings
can really move that net worth needle.
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KERI
That's right.
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So really now that we went through
both of those examples,
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basic math
maybe for the banker, of course.
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You are
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improving your net worth,
and it's actually kind of simple
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as long as you keep it within check,
at least in concept,
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your first goal is to have
a positive net worth.
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After that, your goal should be
to increase that net worth by continually
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increasing your assets
while you're keeping
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the liabilities to a minimum.
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Got that?
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JUSTIN
Yes! That makes sense.
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KERI
Okay, so money you owe, yup
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JUSTIN
Have more money than what I owe, first. Right?
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KERI
Yes!
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JUSTIN
So $5 total net worth.
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And now long term year after year,
let's get to $10, 15, 100, a thousand, got it.
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KERI
Yes! Absolutely.
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So while you're still being mindful
of other indicators
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00:13:39,151 --> 00:13:42,621
that can happen during
the financial health, such as managing
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00:13:42,621 --> 00:13:45,858
or improving your credit score
and living within a solid budget,
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net worth will tell you a holistic story
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00:13:49,361 --> 00:13:53,599
about how many aspects of finances
are working together.
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So ideally, saving
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00:13:56,802 --> 00:14:01,073
would always increase
while debts would decrease.
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00:14:01,707 --> 00:14:05,444
But that might
not always be the case. Life happens..
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There may
be periods when your savings is lacking
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00:14:08,881 --> 00:14:12,117
but debt gets paid down
faster or vice versa.
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And that's okay.
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00:14:13,986 --> 00:14:16,956
It's okay. Those are going to happen.
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JUSTIN
I think that's so great
because like I was saying,
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you know,
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00:14:20,259 --> 00:14:23,262
at the beginning of our conversation,
my wife and I were really been
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focused on our budget.
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And so as we started to think
a little bit more longer term, right,
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where do we want to be a year from now,
five years, ten years?
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That budget has felt a little
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00:14:32,771 --> 00:14:36,242
limiting in the sense of, right
it feels to day to day.
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And so kind of what you just helped
walk me through,
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00:14:39,545 --> 00:14:42,114
what this net worth offers
is just that bigger picture
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00:14:42,114 --> 00:14:44,049
and kind of like that longer
term planning.
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00:14:44,049 --> 00:14:45,818
So now we would kind of know,
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00:14:45,818 --> 00:14:50,289
hey, our net worth should be whatever
it is in one year, ten years, 15 years and so.
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KERI
Yeah.
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00:14:50,656 --> 00:14:52,725
JUSTIN
Yeah, I think this has been a really great call.
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Really great education for me.
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00:14:55,261 --> 00:14:56,729
Keri, thank you so much for coming back on.
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00:14:56,729 --> 00:15:00,366
Is there anything else that you'd like
to share or anything at all?
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00:15:01,333 --> 00:15:03,869
KERI
I don't think so. Thank you for having me.
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00:15:03,869 --> 00:15:05,204
And as always,
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00:15:05,204 --> 00:15:09,608
anybody or you have any question, reach
out to the financial experts.
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00:15:09,608 --> 00:15:13,145
They'll always be more than happy
to help you out and come up with a plan.
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00:15:13,412 --> 00:15:15,214
KERI
Perfect. Thanks, Keri.
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KERI
Yeah, thank you!
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JUSTIN
For more resources, check out FNBO.com
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00:15:19,318 --> 00:15:22,821
or subscribe to us on YouTube
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00:15:23,055 --> 00:15:26,258
Consider giving us a rating or a review
as they help us get the word out.
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00:15:26,325 --> 00:15:30,262
And remember, our discussions are designed
to inform and inspire for
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00:15:30,262 --> 00:15:34,133
personalized advice, we always recommend
consulting a financial professional.
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00:15:34,366 --> 00:15:38,370
Until next time, keep on making smart
financial choices and thanks for listening
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00:15:38,370 --> 00:15:40,406
to the Cashology podcast.
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00:15:40,406 --> 00:15:43,976
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00:15:43,976 --> 00:15:46,979
only and not intended to provide
specific advice or recommendations.
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00:15:46,979 --> 00:15:47,746
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00:15:47,746 --> 00:15:50,749
about your financial situation, consult
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00:15:50,816 --> 00:15:54,119
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00:15:54,320 --> 00:15:57,323
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00:15:57,456 --> 00:15:59,291
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