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One of the most searched categories of successful and famous people is the term “net worth.” People are fascinated with other peoples’ supposed net worth. Just search my name and before you even hit enter, you will see the second most searched term after my name is “net worth” then age, height, Wikipedia, wife, quotes, books, real estate. For the record, I am 62, 5’8,” killed my Wiki page, my wife’s name is Elena, I have a lot of quotes, 21 best-selling books and business programs, and some $2b in real estate.
Now let’s talk about net worth. I doubt most people even know what the term “net worth” means or how to calculate it for themselves. Net worth is the value of the assets a person or corporation owns, minus the liabilities (debt). It can be a somewhat meaningful metric to gauge a company or individual’s financial health, but in truth, net worth means very little with regards to how a company or individual can spend money. I will explain below.
Cash = $0
Car = $500
Total Assets = $500
College Loan = $40,000
Personal Loan = $3,500
Total Debt = $43,500
Net Worth = $ -43,000
This is called being “in the red.” Clearly, I wanted to change my financial condition, so I started consulting anyone who knew more than me, almost everyone, which resulted in me getting a lot of bad advice.
I was told the best way to increase net worth was to reduce spending and get rid of debt. Between you and me, I didn’t just want to increase my net worth; I wanted to get rich.
Later, I discovered there are two ways to increase net worth and only one creates real wealth;
1. Reduce debt and save money.
2. Increase assets (specific types) that increase in value.
I started studying those who had achieved wealth and realized they all invested in assets to do so, even borrowing money to buy specific types of assets that increase in value (appreciate).
Assets like houses, cars, cash and retirement accounts don’t create wealth, they simply create a false sense of security. Cars, houses and retirement accounts give you a way to get around, a place to live and a way to retire.
Investments, inventory, businesses, property, equipment, patents, trademarks, royalty, accounts receivable and partnerships are assets that can grow in value. While my friends were paying off their cars and homes, I started investing in other assets.
To create real net worth and real wealth, you have to invest in the right kind of assets. All assets are not created equal, and all debt is not bad debt. Some assets decrease in value and others grow in value. An apartment building that produces income will probably appreciate more than a house you live in. Buying a car will not provide appreciation in most cases, but investing in a successful car dealership probably will. Taking on debt to invest in business partnerships will probably prove to be a better retirement account than a 401K.
So remember, there are two ways to grow net worth;
1. Save money and reduce debt.
2. Grow assets and use debt to do so.
Regarding my net worth today, it depends on a few things:
• Is the real estate worth 2.2B?
• Is Cardone Enterprises worth 15X earnings or is it 25 times?
• Is my partnership at Cardone Ventures worth more with my brand than without and worth more together than separate?
• Is the Cardone Brand worth worth 10X more than its net profits?
• Would there be a buyer for any or all of them?
The most important thing about my personal net worth is how many people I can help improve their net worth. No one will remember you or me for how much we have, but they will remember how many people we helped.
A New York Times bestselling author, Cardone is the world’s No. 1 sales trainer and an internationally renowned speaker on leadership, real estate investing, entrepreneurship, social media and finance. His privately-held companies have annual revenues exceeding $100 million. Forbes named him No. 1 of the “25 Marketing Influencers to Watch in 2017.” He regularly appears on Fox News, Fox Business, and MSNBC and writes for Forbes, Success Magazine, Business Insider, CNBC, and Entrepreneur. He urges his followers and clients to make success their duty, responsibility and obligation. He currently resides in South Florida with his wife and two daughters.
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