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Net Worth

I'm sticking this in Finance.  There is a whole lot else to the world than money, and there are many other ways in which one can be rich.  I'm well aware of that, but I intend this as a financial lesson and will be approaching "net worth" from that perspective.

There are three ways to increase your net worth:

  1. Increased assets.
  2. Decreased debts.
  3. Investment returns.

It's as simple as that.  Don't owe anybody anything and everything you have is your net worth.  Owe someone something and that detracts.

Assets are tricky.  They're also, for the purposes of my discussion, tangible.  My house is an asset.  My car is an asset.  My art if I had any or my precious metals if I had any are assets.

I say they're tricky because "increasing" them runs one of two ways, either getting more of them, or having the ones you own become more valuable.  The latter way is awfully suspiciously close to the return on an investment, but that's where I draw the imaginary line.

You don't get a house because it's "an investment", you get it because it's a place to live without paying someone else to live there.  You don't get a work of art because it's an investment, you get it because you love it so much you need to be able to see it whenever you please.  If your house is worth more ten or twenty years down the road, that's a bonus and an increase in net worth, but even if it's worth less than you "paid" for it, it's an asset and a place to live.

There we are, I've said all I intend to about those two.

That leaves return on investment as the way to increase your net worth that I will be talking about.  I'll take a break and come back to the topic in further posts, because despite my "more than money" intro and my intent to discuss things financially, I am keenly aware that there is a lot of room for allegory in most of what I have to say.

For the audience that isn't me two decades past, while you're waiting you can go pay some bills.


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