Does Your Net Worth Matter?

The Principle:

Is net worth just a number or an indicator of something more? Brian talks through what’s important to focus on when considering your money. He also shares a client story of someone selling their business and the tax implications of that.

Honest Takes:

If you have a big net worth, you might feel pretty good about that. But does that really matter? Instead of focusing on your net worth, try looking at what income your net worth can produce. 

Investable assets and net worth are two different things. Investable assets make money and can grow. Something like cash however is not growing. Your investments may have gone up more lately, but keep in mind that there will be bumps along the way. You have to weather the storms of the stock market if you’re invested.

Always make your dollars work for you. Your long-term investments might take risk whereas the money you need income on could be a lower risk. You have to figure out what the balance is. Your net worth could be millions but if it isn’t generating enough income for you, what good is it?

Some money should be kept in cash for emergencies. Often, it’s recommended to have three to six months of expenses in the bank for an emergency. What are you comfortable with? Don’t forget that some of your investable money in a brokerage account can still be sold within a few days.

A local client sold his business for $2 million and wants to know how the Biden tax increases will affect him. Capital gains taxes may impact something you want to sell later, despite not being super rich. Selling a business is not the same as taking money from an IRA. This happens all at one time. Work with your advisor to make sure you do this in a way to minimize the tax.

Listen to the entire episode or click on the timestamps below to skip ahead.

[0:13] – Does your net worth even matter?

[3:26] – What percentage should you have as an emergency fund?

[5:07] – How will selling a business be impacted by tax increases?

[9:05] – Do we know what the tax increases are for sure?

Today’s Truth:

“You’ve got to have planning because there’s things we can do to minimize the tax.”

Brian Bowen


The Host:

Brian Bowen – Contact