Did you understand?
It's not everything you currently own that determines whether you're rich or poor. Just because both my partner and I could be living in a big house within an upmarket suburb, drive two Mercedes Benz, and take our youngsters to a pricey school, doesn't automatically mean we're rolling in fabulous wealth like Ali Baba of the Arabian Nights story.
Actually, there's another thing, and bank managers and other lending institutions love it. net worth
Do you know what that thing is? I'll tell you in a moment.
Be ready for a shock to one's body!
Well, finished that many bank managers and lending institution like to see on the desk before they can even think of using the services of you is a financial document... actually, a financial statement, because so many people want to call it.
And the name of the financial statement is...
Net Worth Statement!
What is a Net Worth Statement?
To put it simply, a net worth statement is a financial document that shows your personal Net Worth (or true worth - what you're worthy of in financial terms. It is the overall balance remaining after deducting your total calculated liabilities from your own total calculated assets.
The total amount that remains after doing this simple math calculation can be your Net Worth, or your 'true worth!'
Hence, Balance Sheet.
Your Net Worth statement is a report which tells other folks or anyone who's interested, like a bank manager, a lending institution, etc. whether you're rich or poor. Put simply, do you possess sufficient assets to cover your debts in case you be required to pay for back a loan, for example, at short notice?
Your Net Worth can also tell others if you're moving forward, going backward, or perhaps standing in the midst of the road of your financial life.
For instance, an advantage (+) amount next to your the total amount (+$350 678.00) means you own significantly more than your debt others.
Problem is IF your Net Worth shows a minus (-) amount (-$350 678.00), it really means bad news for you. Or it means that your total liabilities exceed your total assets, and you owe others significantly more than you currently own. And your rivals view this as another way to express your fortune is all gone... finished... kaput.
Or "He's dead broke!"
Why did I claim that?
That's because after your creditors have sold all that you have to cover your debts, you will see you can forget money left to your name. And the worst part is that you will still be required to pay for more of another creditors whose outstanding accounts remain unsatisfied.
But the truth that you have a minus (-) net worth does certainly not means all is lost. You see, many people know that life is such as a roller-coaster. Sometimes, and through no fault of yours, things can go topsy-turvy on you. For richer or poorer.
And for many who are luckily enough to know this, a minus (-) net worth may be the catalyst that they might require to propel them to newer heights of financial freedom.
That's because as soon as they're up against a challenge like this, they do everything inside their power to create in additional money and assets to their coffers to balance out the minuses within their net worth statement.
Still wondering why it's called a Balance Sheet?
Therefore the question is...
Perhaps you have looked into your Net Worth, or put aside some of one's precious time to balance your assets and liabilities lately? Or even, today is the best time and energy to ensure your financial statements really are a true reflection of one's true wealth.
Besides, in the event that you don't, how are you going to know whether you're moving forward, going backward, or simply standing in the center of the road of your financial life?