[Summer Remix] 102: Net Worth is King

We talk about fear a lot on our podcast. Fear is natural and, TBH, necessary. But when it comes to finances, three types of fear tends to hold us back: from investing, from charging clients what we’re worth, or from taking chances when building a business.

Fear can also make you focus on the wrong thing when it comes to your net worth. Paying down debt rather than building up your assets, to be specific. And that’s what we discuss in this week’s episode: where our fear of the “debt boogeyman” comes from, our three-step strategy on how to overcome it, and what part of your finances you should be focusing on instead. 

WHAT YOU’LL LEARN

• The first of our Nine Commandments
• What is your net worth?
• Debt vs. assets: which should you focus on more?
• How we got inspiration for this episode
• Why the Dave Ramsey way of looking at debt is problematic
• The types of assets you need
• Where did Millennial “fear of debt” come from?
• How to change your debt-fearing mindset
• Steps to building a positive net worth
• A couple of analogies for paying down debt and building assets

Assets - Liabilities = Net Worth

“Net Worth is King.” That’s our second of Nine Commandments, after “Leave the Punch Clock Mindset Behind.” (A little insider info for you: we’ll be talking about our other commandments in future episodes!)

So what is your “net worth,” exactly? Simply put, your net worth = your assets - your liabilities. 

You want a positive net worth, which is where you have more assets than liabilities. “Own more things than you owe,” as Dustin put it in this episode. As simple as that sounds, we see more people focus on paying down their debt rather than building their assets. That’s partly because our culture focuses on debt so much, even though assets are just as important, if not more so. 

The Problem with Focusing on Debt

Let’s be real: our society’s obsessed with debt. 

And honestly, we blame Dave Ramsey and his Debt Snowball Plan. Yeah, we said it. 

We won’t go into too much detail about his methodology (which we have linked in the show notes if you’re really interested), but generally, he advises people to attack their debt first. Once it’s all gone, then you should invest, he says. But there’s a fatal flaw in that plan: all those years you spend paying down debt only are years you could be saving thanks to compounding interest!

But we keep shooting ourselves in the foot by paying down debt… because we’re scared! Where does this fear of the debt boogeyman come from? Our parents dealt with the highest interest rates ever to date in history, from the mid-1960s to the mid-1990s. Which, by the way, is the generation that Dave Ramsey comes from. We Millennials were raised to believe that we have to be debt-free before we save or invest. (Thanks, Mom and Dad.) Now, over the last 10 years, interest for debt is at one of the lowest it’s ever been. This means that the Baby Boomer mentality of fearing debt doesn’t really make sense anymore.

We need a new way of thinking about debt and assets.

How to Work Towards a Positive Net Worth

We’ll lead the charge on getting rid of that debt-fearing mindset. Instead of looking at debt as some horrific monster, think of it as a necessary presence instead. You can and will deal with it, but other parts of your financial strategy are more important and will make a bigger impact on your wealth. 

Think of it this way: even if you pay down your debt to zero, if you haven’t been saving until that point, you have no wealth. Ze