How Not to Measure Wealth and Calculate Your Net WorthTim Kinnard
A lot of people have learned to evaluate how they are doing in life based on the bottom line of their financial statement, which they’ll itemize with the simple formula: “Total assets minus total liabilities equals total net worth.”
I admit, this little calculation is relatively easy to remember and to do the math on. I would even say it can be quite helpful if what you’re looking for is an appraisal of how much belongs to you after you subtract whatever you still owe financially. If those are the numbers you’re looking for, you simply add up what you have in terms of both fixed and liquid assets. That includes all the money you have in the bank or the market, as well as all the cash you’ve got hidden under your mattress; it includes the fair market value of your home, the possessions and valuables in your home, your vehicles, and so forth.
You add up the total of all those assets in one column, and then in another column you add up all that you currently owe in terms of your financial obligations—your mortgage, credit card debt, student loan debt, car payments, and the $20 you still owe your friend for covering your movie ticket and popcorn the other week. You get the grand total of all those debts and subtract them from your asset column, and you come up with a number that is your monetary net worth. Again, that can be a helpful metric to use. In fact, in some future videos I plan to talk about some practical ways that a person can go about improving those numbers.
But what if I told you that I’m not convinced that such a formula is necessarily the best way to be measuring wealth and calculating one’s worth? Why do I say that? Well, because the entire equation assumes the only assets and liabilities you have to measure and calculate are those that have a monetary value. That is to say, you’re only adding up those things in your life that can be assessed in dollars and decimals.
In my opinion, when you do that, you unavoidably leave off those things in your life that are truly of the greatest value. What are those things? Well, just consider what in life is understood to be truly priceless? What in life can money not buy? Things that belong on that list would include your close relationships—family, friends, church community, etc. The people in your life are, or I would say, should certainly be, ranked among your most priceless assets.
What else in life is priceless? I think things like time, freedom, health, a sense of purpose, contentment, happiness and joy are all on that list. These types of things you can’t just tally up in simple numbers in an Excel spreadsheet, and yet it can be so obvious and evident when a person is cashing in on the rewards and dividends that these kinds of treasures offer.
A lot more could be said about all this, but the bottom line is, if you’re looking for a standard of measurement and a formula to calculate your worth and the value of what you have, don’t just quantify that by the bottom line of a financial statement. You’ve got to assess so much more than how many figures show up in your account balance.
Jesus taught in Matthew 6:19-21
“Do not lay up for yourselves treasures on earth, where moth and rust destroy and where thieves break in and steal, but lay up for yourselves treasures in heaven, where neither moth nor rust destroys and where thieves do not break in and steal. For where your treasure is, there your heart will be also.
In other words, according to the Lord, there is a higher measure of wealth and a very different kind of math we should be using to factor our worth. I just wonder, if you started making out a list of those areas that truly matter in life and begin evaluating how you’re doing, and the degree to which you are investing in those treasures, how are you doing? Would you evaluate your relationship to God, your spouse, your kids, and/or your church as what it should be? If you could audit your time, your freedom, your life’s purpose and goals, your sense of personal growth and fulfillment, all those things, would it look like you’re making perceivable progress, or would it look like you’ve got a lot of catching up to do?
None of us want to end up like Ebenezer Scrooge from the old Charles Dickens story. Scrooge was quite proficient at counting and recounting his assets, producing what I’m sure was a very thorough and well-worked out net worth statement. Unfortunately, despite have such a detailed accounting of all his assets and liabilities, he eventually discovered that he was actually quite bankrupt in the areas that really mattered. We don’t want to make the same mistake.