Wealth

When can you expect to have the ability to create wealth? Some people don’t have this ability until they’re 50 years old and their children are out of the house (along with their purchase accounts!). Once you get a clear-cut picture of your cash flow, adjust your purchase patterns and reduce your debt load, then you can start creating wealth.

Wealth is the value of everything you own. Add up all of your assets and subtract your debts. That’s your wealth or “net worth.”

You will acquire greater wealth as a result of timing and understanding what it takes to sustain yourself and your family. And, as you might suspect, living debt-free can speed this along because it creates lots of cash flow.

But being debt-free will not in itself create wealth. You need to create a plan for how you’ll spend your cash. You’ll want to create 5-, 10- and even 20-year goals to give yourself proper life-planning perspective. The tools in this book can help you create the foundation for these goals.

Financial Assets

The Federal Reserve Board’s Survey of Consumer Finances for 2007 indicated that families in the United States split their assets 66.1% nonfinancial and 33.9% financial:

Non-Financial Assets	% of 100%
Vehicles	4.4%
Primary Residence	48.1%
Other Residential Property	10.7%
Equity in Nonresidential Property	5.8%
Business Equity	29.7%
Other	1.3%

Financial Assets	% of 100%
Transaction Accounts	11.1%
CDs	4.1%
Savings Bonds	0.4%
Bonds	4.2%
Stocks	17.9%
Pooled Investment Funds (excluding money market funds)	15.9%
Retirement Accounts	34.6%
Cash Value Life Insurance	3.2%
Other Managed Assets	6.5%
Other	2.1%

What Are You Worth?

Accountant types use a balance sheet to calculate net worth: the value of your assets minus your liabilities.

Assets		Debts
Stocks & Stock Funds		Mortgage(s)
Bonds & Bond Funds		Home Equity Loan
Cash (Savings, CDs, Money Market Funds)		Student Loan
Retirement Accounts (401k, IRAs, SEPs)		Credit Card Balances
Variable Annuities		Auto Loans
Value of Primary Residence		Other
Vacation Property / 2nd Home
Art, Collectibles, Jewelry, Furnishings		Total Debts
Other
Total Assets		Net Worth (Assets – Debts)

Peace of Mind

I used to wonder why my wife was so on edge about money.

Without a system in place for handling money where we could both see how our assets were distributed, she could only see part of the picture, while thoughts of potential financial ruin plagued her.

Once we both came to an understanding about how our finances would be blended together and systematically handled, her mind was put at ease. She no longer worried when a doctor’s bill arrived in our mailbox.

Today, we have financial hope. We hope for our future and our children’s future because we’re aware of our situation and make informed decisions. Financial hope is freedom from the burden of the unknown.

Money Wisdom: What is Your Wealth?

There once was a fisherman who loved to fish on the beach. The only thing that made him happier than fishing was seeing the joy on his family’s face when he returned home each day with the fish to feed them.

One day a businessman showed him a big, beautiful boat that could take him to sea to catch more fish. He taught him how to sell the fish and feed more people. Soon, the fisherman needed help to catch all of the fish that the people wanted, so he purchased a fleet of boats and hired a group of fishermen. After years of buying bigger and bigger boats and selling more and more fish, the fisherman decided to retire. He sold his fleet, along with his book of business—the list of folks who’d been buying his fish.

The next day, the fisherman returned to the beach and spent the rest of his days fishing, returning home each evening to see the joy on his family’s face as he brought them his catch.

If his true goal was simply to fish on the beach and catch food for his family, when was the fisherman wealthiest? When he owned his fishing fleets? Or when he was fishing on the beach?

Remember the fisherman. Without a plan, you could spend years focused on distractions and busy-work, instead of following your passion—or fishing on the beach.