Net Worth – The Basics


What is Net Worth?

Net Worth in its basic form is when you take the value of the stuff you have and subtract the amount you owe to others. For example, if you have a house and the market value of the house is $150,000.00 but you still owe $100,000.00 for the mortgage, then your net worth for this item is $50,000.00 (150,000-100,000).

Here is another example. You own a car that is worth $14,000.00 and it is paid for. At the same time, you have a credit card with a balance of $4300.00. Your net worth for those two things would be $9,700.00 (14,000-4300).

Read on to see how we determine our total net worth.

What do you have?

What you “have” are considered assets.

This is a little different that the question “What do you own?” The difference is that if you own something, like the clothes on your back, you are not still paying for it. We need to make a list of what we have. This includes things we own but can also include things like your house, even if you have a mortgage or your car even though you still have a car payment. When we make a list of what we have, we need to put some kind of value. I would argue that you cannot put a price on your photographs (unless you are a photographer) or your underwear since it would be extremely gross to try and sell them to someone else.

Here is a partial list to go by:


If you have them, this list can include stocks, bonds, real estate, 401k, and even life insurance.

Add all the values up. This is the total assets you have.

What do you owe?

What you “owe” are considered liabilities.

This list includes all the things that are not totally paid for yet. You may “own” a house but if you have a mortgage, the bank actually owns it until it is completely paid for. The house is an asset while the mortgage is a liability. You may have some really nice clothes but if you paid for them with a credit card and there is still a balance, then the credit card balance is a liability while the clothes are an asset.

Get it?

Here is a partial list to go by:


The list here is the same but it does not have to be.

What is your Net Worth?

Here is the final step.

Add all the values for the assets from the first list.

Add all the values for the liabilities from the second list.

Now, subtract the liabilities from the assets.

Whatever that number is will be your Net Worth.

Here is an example:

Net Worth Formual

Keep in mind that your Net Worth can also be a negative number.

That of course, is not a good thing but can be fixed with some diligence.

For information on how to dig out of debt, check out my book The Little Debt-Free Book, available on

Three Things

  • Spend Less than you make
  • Save a little each payday
  • Set a goal to eliminate your debt

Can You Save Money By Spending More?

five dollar bill

Spend more and save?

Is it possible to save money by spending more? I would have to say yes. Here’s why.

I can go to a low cost store and buy some shoes. The shoes look good and probably match shoes that are purchased in a higher end store. However, after three months (assuming frequent wearing of the shoes), they start falling apart. Maybe the cushion inside starts coming loose. Maybe the toe or the heal start separating from the shoe. Maybe the stitching starts coming apart.

When I compare that to the shoes that look similar but come from a higher-end store there is a difference. By higher-end store, I am referring to stores that carry shoes that are of higher quality. The shoes from this store could last a year or more based on frequent wearing.

So did I actually save money purchasing the shoes from the discount store? Probably not.

Don’t like shoes? How about vegetables and produce? I have purchased both at the biggest discount store in America and can tell you from personal experience that the food does not last as long as when I purchase those items from other grocery stores.

There are other ways to save

Saving money is a good thing and there are many things that you can buy the generic brand and still be ok. I remember after my divorce, the kids would go shopping with me. One time, I was in the cereal aisle and was complaining about the cost of name brand cereal. One of the kids said “why don’t you buy the stuff in the bags? All our friends do that and it tastes fine.” We started buying cereal in bags that day.


I have a blog post about how much I hate coupons. I know there are people out there who spend countless hours clipping, organizing and saving coupons. I’m sorry. I have better things to do with my time. Having said that, I have taken the sale ads from the grocery stores and used them to set the shopping list for the week. I’ve even gone from one store to another to another in order to get as many sale items as I can.

Three Things

  • Save where it makes sense to save. Just because it is cheap does not mean that it is the best deal.
  • Use coupons or sale ads to save money on groceries. Don’t forget to use a shopping list either.
  • Buying high quality items that will last a long time is better than buying cheap stuff and having to replace it sooner.

Overdraft Protection?


Overdraft protection on your checking account/debit card

Banks are constantly looking for ways to get more fees out of you. Ever since the collapse of the banking system and housing market, they have been adding fees for just about everything it seems.

One of the things they want you to do to keep you from being embarrassed or something like that, is to sign up for overdraft protection on your checking account. This includes your debit card.


Simple – they can charge more fees that way.

Here’s how it works. If you sign up for overdraft protection, you can use your debit card or a check and write it for more than you have in your account. They will cover the cost up to a certain amount and then charge you a fee for the privilege. Sounds like a deal right?

The way the bank words it is that if you can’t keep up with the balance in your checking account and write a check for more than you have in there, then it will cost you $25-35 in bank fees. There are also additional fees from the store or restaurant that you wrote the check or used the debit card.

First off – why aren’t you keeping track of the money in your account?

Since people are using checks less frequently, let’s focus on the debit card for a minute. With overdraft protection, the bank will pay the debit charge for you. So what’s the harm?

The harm is that it’s basically a short-term loan that you have to repay with interest. Can you say “extra fees?”

What if you don’t get overdraft protection?

If you read their statements about overdraft protection, here is what it says about not having overdraft protection.

If you do not opt-in, beginning after a certain date, the overdraft services won’t apply. The transactions will be declined if you don’t have enough money in your account. You will also not be charged any overdraft fees. Did you hear that? If you do NOT have overdraft protection, there are no fees and the card is simply declined.

So, on the occasion where you do not keep track of your balance (I can’t believe you would not keep track of it), if you try to purchase something and do not have the funds, the card will be declined and you won’t be able to buy the item.

Can you say – no brainer?

Living On A Prayer

Grocery list for broke people

I remember a time when I ran out of money a week before I was going to get paid again. I ate what little food I had but it was nowhere near enough to make it through the week. I paid a big price for it. I borrowed $20 from someone with the agreement that when payday came, I would return $40. 100% interest in less than a week. Wow!

After that week, I made sure that I would always have food available. Here is a list of the items I purchased and kept in my apartment or house from then on.

  • Bread – two loaves
  • Peanut butter – one jar
  • Jelly – one jar
  • Powdered drink mix – one container (I didn’t want to drink only water)

Let’s face it, you can eat peanut butter and jelly sandwiches three times a day and survive. I’ve told my kids the story and have always encouraged them to keep a similar list for themselves.

Shopping for those less fortunate

When my kids were younger, one of the things we did as a family was to shop for groceries to donate to those less fortunate. We did not have a lot of extra after a divorce but it was something we could do for others and remember how fortunate we were.

Each week, we would go grocery shopping. One of the things on our list was to shop for others. The kids were given $10 to shop for others. The restrictions were that it had to be items that would last. Dry goods, mixes, rice, pasta, canned goods, etc.

Some of the things that made it in the cart were:

  • Pasta
  • Spaghetti sauce mix
  • Canned tomato sauce
  • Rice
  • Ramon noodles (I won’t buy those anymore)
  • Soups
  • Canned meat
  • Snack cakes
  • Drink mix
  • Peanut butter
  • Jelly

I’m sure there were other things but we were able to fill a couple of bags with groceries each week. I think it not only taught them to be grateful for the things they had but to shop with purpose and with a frugal eye.

At least that is what I hope the message was.

North Texas Food Bank


Financial Year – 2015

It’s 2015!

It is ten days into 2015 and we have a lot to do to be ready for the coming commitments for the year. I’m not real happy with resolutions as you can read in the post Are Resolutions A Waste Of Time. Having said that, there are still a lot of things that my wife and I would like to accomplish and that takes some planning.


Prepare for taxes. Yes – it’s that time of year. Soon you will be receiving your tax documents from your employer, banks, stock holdings, real estate and the list goes on. If you are self-employed, hopefully, you have done better than I have of paying the taxes quarterly. If not, then get ready to gather your stuff and figure it out.


January is also a great month to play your savings. Want a vacation? Better start putting something back. Want to visit relatives who live too far away to drive? Start putting something back for that too. Have a large purchase to make this year? I don’t need to say it again – do I? What about retirement? As long as you have an income, you can start at any age to put money into a Roth IRA. That’s right. Even if you are delivering papers at 12 years old, you can start a Roth IRA. There are some restrictions though. For instance, if you are single, you need to have an income, not from real estate or other investments of less than $114,000.00. Most of us fall into this category. For married couples, the limit is $181,000.00. Again, most of us fall into this category.

As I have said in the past, retirement is a financial state. The faster you gather enough assets to cover the lifestyle you want to lead, the faster you get to a point where you can choose to keep working, do things you have a passion for or travel wherever and whenever you want to. Of course, the best option is to pick a career that you already have a passion for – that way, retirement probably won’t even be a though.

Three Things

Here are three things you can start right now to prepare for 2015

  1. Save a small percentage of your income towards retirement. No one is going to make sure you have enough unless you do.
  2. Save for a vacation. Even if it is a long weekend away with family or even by yourself, it’s good to take a break from your normal routine.
  3. Don’t keep a balance on your credit card. There is no need to pay interest fees for the stuff you buy. If you don’t have the money for something, save some and when you have enough, go get it. That’s a goal.

James Lipscomb

Great Sadness

Jim and Dot Lipscomb 2015

It is with great sadness that I announce the passing of our friend Jim Lipscomb from this place.

After a year and a half of struggle after his diagnosis of cancer, he was surrounded by family as he said good bye.

I spoke with Dorothy a few minutes ago and they are heading home now. The kids and grandkids were with him at the time.

Jim and Dorothy have remained faithful this entire time and Dorothy is thankful that Jim is no longer struggling.

Please keep the Lipscomb’s in your prayers as they go through the next days, weeks and months.