Re: need your opinion on “net worth” - Posted by Mr. Big
Posted by Mr. Big on June 02, 2005 at 15:29:19:
What are your goals? What is your plan? It could be net worth is not important to you, but it is to me.
You need to plan long term, like 5 10 or 20 years ahead. If you have a good job and are planning your retirement then net worth is really all you have to worry about. But in any case, even if you need the cash flow to live on, net worth should be part of your plan.
If real estate is appreciating at 10% a year in your area, that invisible addition to your net worth could actually be a larger sum of money than the cash flow that you can see. Don’t overlook the power of procrastination to make you rich, simply by keeping your real estate for 10 years or more.
And “net worth” relates directly to cash flow. For example $1,000,000 invested at 8% gives you $80,000 a year. So if you can live on $80,000 a year, and you have a net worth of $1,000,000 in real estate maybe you should sell out and invest the proceeds in first mortgages at 8% for an easy retirement income. And if you don’t have a net worth of $1,000,000 maybe you should think about getting it.
And net worth is an important factor when it comes to getting financing. If you have enough net worth and income from your investments it doesn’t matter if you don’t have a job.
So net worth is only one factor in your investing program, but it is an important factor and should not be overlooked.