Today we are going to look at your net worth! This important number will help us understand your towns financial health by working out the monetary value of everything you own and subtracting the total value of everything you owe. When mushing these two numbers together, the succulent juice that is squeezed out is your net worth.
In our previous letter, we visited our towns financial district and we met with the manager of the central bank. Going back there, you will be able to find out the financial information you seek.
Before you make your journey to meet with the men and women in the grey suits again, please find the below tale on how to work out the all-important worth of your net!
What is everything (of significance) I own? (Asset)
Please imagine that one day an omniscient demigod comes knocking at your door asking for a few minutes of your time. It wants to discuss a “very exciting business opportunity” with you, but before it can do this, it needs to work out how much financial muscle you have. Intrigued, you let the strange creature into your home and lead it into the lounge.
The demigod then puts a medium sized box in the middle of the room and hands you a notepad and pen.
It explains that you need to note down on this pad the significant items you own financially and the monetary value that the items hold. The demigod goes further, explaining that ‘significant’ shouldn’t be anything lower than the value of your cheapest vehicle. There is, therefore, no need to include smaller items that only represent a tiny percentage of your financial world.
Examples of things you should include are:
- Everything in your current accounts.
- Any Stocks or Bonds you own.
- Investments in precious metals, artwork or antiques.
- The value of your home.
- The value of any vehicles in your name.
- Any other items that have a large amount of financial value.
You note the list of things you have which make up your financial life on the left of your page and their money value on the right. You check and double check that you have put down everything, and when finished you hand the page to the stranger.
With a chuckle and a snap of its fingers the box in front of you fills with the exact amount of cash you wrote down on your list.
What is everything I owe? (Liability)
The demigod stands up, stretches out, and puts a second box next to the first. It hands the note pad back to you and asks you to make a similar list but now noting down all the debts and money you owe. Like before, it asks for you to be specific when it comes to noting down the monetary value of your debts. Differing from your previous list, however, you are asked to note down debts of any size, no matter how small or insignificant.
As before, debts you may have accrued may include…
- The remainder you owe on your mortgage.
- Any money owed on your vehicles.
- Any student loans you have taken out.
- Credit card debt that has built up.
- Finance you have on any furniture or services.
- Money borrowed from family or friends.
Once you complete your list of debts and put a monetary value next to each, you hand the note pad back to your guest. With sorrow in its eyes, it clicks its hands and the warmth of a flame erupts from the second box. With a flick of the demigod’s wrist, money from your first box is lifted and dives into the now crackling fire sitting in the other!
Once the train of money stops flowing to its fiery doom, the second box is extinguished and collected by the demigod. It then points to the remaining box and encourages you to pick it up.
“This is the value of everything you own in cash. This is your net worth.”
So in conclusion, we need to know how much money is in yours and your towns box!
Imagine then, that you hear that knock on your door. You let the stranger in, take hold of the note pad and pen, and through learning your net worth, bring your financial situation into clear focus!
When we next speak, I eagerly look forward to hearing your findings.
Rose-Blanc Town management