Happiness isn’t getting what you want
It’s wanting what you got
– Garth Brooks
I tend not to get too philosophical, but the above quote has always resonated with me. There’s nothing wrong with wanting more, but being content with your current situation ensures that you’re not trying to keep up with the Joneses.
That being said, in order to want what you got, you need to know what you got.
According to Credit Karma, 51% of Americans – and 61% of American women – don’t know how to calculate their net worth.
Perhaps more disturbing, 31% of Americans have a net worth of zero or less and 30% of Gen Z (people born between 1997 and 2012) cares more about celebrities’ net worth than their own.
I’ve kept a quarterly tally of my net worth for several decades, and it’s not because I want to bask in the glow of the numbers as they get larger, like a modern-day Scrooge McDuck.
I do it so I know where I stand if a big source of income suddenly goes away.
It’s happened to me before.
Early in my career, when I was working for a dot-com during the collapse, we came into work one morning, and our email stopped working. Minutes later, the head of HR came in and tearfully let us all go.
My son was 14 months old.
Since the Bay Area was the focal point of the dot-com industry, jobs were vanishing faster than wrinkles on a forehead in Los Angeles.
After that, I never wanted to be unaware of what my resources were – or, most importantly, how much income my investments spun off.
That’s why, whenever I run the numbers, I also calculate how much income the investments are generating. All of my dividends are reinvested, but if necessary, I could shut off reinvestment to provide income to pay bills.
The income column of my spreadsheet has always been what’s most important to me, and knowing my net worth gives me an idea of how much more income I could generate if I had to.
I strongly recommend going through this exercise at least once a year. You may be surprised what you find out. You might realize that your investments are not generating enough income, or perhaps you’ll be pleasantly surprised at how much income you are receiving. Either way, it’s good to know where you stand in case you need to boost that number.
If you’re unfamiliar with how to calculate your net worth, it is very simple:
- Add up all of your assets – your stocks, bonds, alternative investments, cash, checking account, crypto, even the equity in your house (though I strongly recommend being conservative when you estimate your home’s equity).
- Subtract all of your debts – your mortgage, auto loans, student loans, credit card debt, etc.
That’s it.
That’s your net worth.
When you’re looking at your brokerage statements, there is usually a line that shows you how much you’ve earned in dividends and interest that year. That will give you an idea of how much income your investments are spinning off. (Don’t include capital gains in this figure. You want to understand how much income you’re earning without needing to sell anything.)
Knowing what you have is vital for knowing how much you can invest and where. Do this simple exercise so you know what you’ve got and you can be happy with it.
Hopefully, next year you’ll be happy with a little more because you invested the right way.