Chapter 1 Planning Your Financial Future: It Begins Here
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Building Wealth
Wealth, as it relates to fi nances, is a plentiful supply of money or valuable
goods. A wealthy person may be called prosperous or affl uent. Someone who
is wealthy has enough money to be secure fi nancially. Even someone who is
wealthy may not necessarily have enough money to buy everything she or he
desires. (Very few people can buy everything they want.) However, when you
are wealthy, you do not have to worry about paying your bills.
As you begin a fi nancial plan, you need to know your net worth. Net
worth is the difference between what you own and what you owe. Net worth
is found by listing all assets (things you own) and then subtracting liabilities
(debts you owe) from the assets.
Assets – Liabilities = Net Worth
Where do you want to be fi nancially in twenty or thirty years? Do you
want to be on your way to becoming a millionaire or maybe already there?
What makes someone a millionaire? Is it having $1 million or more in the
bank? Not necessarily. An individual may have money in a bank and other
assets that total $1 million or more. However, to be a millionaire, you must
have a net worth of $1 million or more, not just $1 million in assets. Many
people who earn large salaries or make money from investments never
become millionaires because they have a large amount of debt. To give you
a simple example, if you own a house worth $1 million, does that make you a
millionaire? Not if you have a $900,000 mortgage on it! Get the idea?
3. List 10 long-term goals that you would like to achieve. (Remember to consider your values when setting
goals.) State actions you will take to achieve the goals and include the amount of money you may need.
Long-Term Goals Actions and Money Needed
Ideally, the
older you are, the
more your net
worth should be.
Your assets should
increase while your
liabilities decrease.