Chapter 1 Planning: Your Financial Future Begins Here 9 Copyright Goodheart-Willcox Co., Inc. May not be reproduced or posted to a publicly accessible website. LO 1-4 LO 1-4 Building Wealth Wealth, as it relates to finances, is a plentiful supply of money or valuable goods. A wealthy person may be called prosperous or affluent. Someone who is wealthy has enough money to be financially secure. A person who is wealthy should not have to worry about paying bills and meeting basic needs. However, even a wealthy person may not necessarily have enough money to buy everything desired. Very few people can buy everything they want. As you begin a financial plan, you should know your net worth. Net worth is the difference between what is owned and what is owed. In order to build your wealth, you must own more than you owe. An asset is an item of value that is owned, such as a tablet computer or money in a savings account. A liability is a debt that is owed, like an unpaid bill. Net worth is found by listing all assets and then subtracting liabilities from the assets. assets – liabilities = net worth Consider the following example. If your total assets are $1,785 and your total liabilities are $968, what is your net worth? Assets $1,785.00 Liabilities – 968.00 Net worth $817.00 Liabilities, such as unpaid loans or credit card debt, reduce a person’s net worth. F F Y I Being Financially Responsible Needs and Wants: A Checklist Do you ever think about what you really need and what you want? Use this checklist to help you consider your needs and wants. Yes No _____ _____ 1. Do I need to buy designer clothes to look good? _____ _____ 2. Do I need to buy a car to get to school? _____ _____ 3. Do I need to save money for college? _____ _____ 4. Do I need to buy the latest streaming device? _____ _____ 5. Do I need to go the movies every week? _____ _____ 6. Do I have to borrow money to make it through the week? _____ _____ 7. Do I need to buy the newest video games? _____ _____ 8. Do I need to buy special sports equipment for my team? _____ _____ 9. Do I need the newest smartphone? _____ _____ 10. Do I need to eat out with my friends at restaurants after every school event?