Every year, Forbes, a business magazine, publishes a list ranking the world’s wealthiest individuals. How do they compare everyone? By using their net worth.
What is net worth? It is the sum of all of an individual’s assets (positive number) and liabilities (negative number). In other words, everything you own minus what you owe. It’s also important to note that in order to grow financial wealth, it makes sense to track your financial decisions that contribute to your net worth.
Not all assets are created equal. Some appreciate while others depreciate. Take cars for example: cars are an asset, but it is a depreciating asset. How many times have you heard that after purchasing a car, it’s value instantly decreases as soon as you drive it out of the dealership lot? One’s net worth goes down with a car purchase. However, with real estate, an appreciating asset, although an investor incurs debt to purchase a property, the property’s value adds to a person’s net worth. The mortgage acts like a built in “investment plan” with each payment adding equity and lowers debt.
Now imagine having more real estate properties and also having someone else pay down the mortgage. How much faster would your net worth grow? Even better, what if the rent paid on the property was greater than property expenses and there was something left over every month generating positive cash flow! Wouldn’t that be amazing! Investing in real estate is definitely one sure way to grow net worth.
What is the difference between financial riches and financial wealth? Financial riches are achieved through something high net income earners have – a big paycheck. Having a lot of money makes you rich. But there is a problem. Money is earned with your time; you are literally trading the prime years of your life working, to earn money. If you stop working, you stop being rich. In contrast, financial wealth is achieved through owning assets, creating and investing in opportunities that allow income generation for you. This aspect of having money “grow” more money for you is the essence of financial wealth.
My 2nd grader is just starting to discover the world before her and dreaming of finding the cure for childhood diseases, saving the planet from pollution, helping the less fortunate, feeding starving children… Remember those days when you had lots of time thinking about how you can make the world a better place? What about now? Are you pursuing those dreams? Instead of trying to live within your means, confined by your current paycheck, pursue ways that can allow you to live your dreams! What would financial wealth through real estate investment mean for you? Can you image the dreams that you can pursue once you have financial freedom? We invite you to join us and start the journey towards investing in your financial freedom. (Contact us to be added to our newsletter.)