12/26/2005

Advice from Nashville's leading Financial Aid Advisor Dave Ramsey

 
Dave Says
By Dave Ramsey
Author of:
Financial Peace and
The Total Money Makeover

"What is net worth?"


Dear Dave,

I hear people in financial circles talking all the time about someone’s “net worth.” What exactly is net worth and what does it mean?

Ken

Dear Ken,

Simply put, your net worth is what you own minus what you owe or any debts you have. There are lots of people who use net worth as a gauge of your financial independence, but that’s not necessarily the case. You can have a huge income, but if you’ve got piles of debt, then you’re not very financially independent. You’re still tied to all those payments.

The best way to improve your net worth and every other aspect of your financial life is to get out of debt and save money. When you don’t have any debt and no payments to eat your paycheck, you free up the largest wealth-building tool at your disposal – your income. It’s always better to have that hard-earned money staying in YOUR pocket rather than going into someone else’s.

- Dave


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