As you might already know, the point of this blog is to help you become more financially aware so you work less and earn more, pay less in taxes and increase your net worth quickly and easily.
Towards that end, I would like to share a couple of anecdotes with you every now and then since nothing can ways the message better than telling a story because as they say, a picture is worth 1000 words.
So let me paint a really interesting and thought-provoking picture for you.
I have a really good friend of mine who lives 30 minutes away from my place, in the greater Toronto area.
He is 30 years old, works part-time and currently lives with his family.
Since he has been out of work for the past couple of months and he needed some money, we got together and started discussing some options.
Oh, You Make Me Speechless
In conversation, I asked him, “By the way, do you know how much your family’s personal residence is worth these days?”
He thought about it a little bit and then gave me a value for the home which was simply nowhere even closer to the market value. In fact, he had overstated the value of the house by at least $150,000.
I politely told him that the market would currently pay a lot less than the value he was telling me, which he felt a little hard to believe.
I then asked him how much of a down payment his family has put down in the house when they initially purchased it in 2010.
He had no idea.
I then asked him what the monthly mortgage payment was and how much does he personally thinks his family had paid the house down by, to which he once again had no clue.
Simply put, his answers and a simple lack of interest in the subject surprised me.
I then said to him, “You should either ask your family about the answers to these questions. If they don’t have the answers, you should call the bank and talk to the mortgage department since they can easily send you this information. It is always good to know details about your personal residence since it always comes in handy”.
Needless to say, he still has not even inquired about these things with his family since to him, it holds no importance.
By the way, it has been over 18 months since we had this conversation.
Now the question you might be asking is, how is his financial situation related to his family’s personal residence?
also, if he wanted to take out a loan, how is that loan affected by the amount of money invested in his family’s personal residence?
Well to be honest, both these things are not really related.
The reason why I asked him these questions was to see if he had any idea about his family’s finances and also to see if he was financially literate.
But as you can see, he did not have an answer to these very simple questions.
Had he been a 20 or 22-year-old guy, I would probably not have put them on the line.
However, since he was my age I felt he should be going about the small details, even if they did not impact him directly.
Why The Middle Class Will Remain There For Decades To Come
The reason why I bring up this anecdote is to show you that most people are carefree about their finances, even if it relates to their biggest investment, their principal residence.
A simple call to the bank would let my friend know what the net worth of his family is.
This would allow him to understand how much money they have invested in the house, how much of a mortgage amount is still left outstanding, how long the loan term is for etc.
knowing how many assets you have and what the value of those assets is, can really reduce the constant anxiety people feel in terms of their finances.
I’ve seen a very simple trend: Affluent people simply are in touch with their finances.
It could be their newest rental real estate that they purchased, their principal residence, their new sports car or the new Rolex watch they recently purchased, affluent people generally know a lot more about cost and value (of assets and liabilities) than middle-class people.
in fact, this is one of the foremost traits that makes them affluent.in
What I Need You To Do
chances are, if you have a decent clue about your or your family’s financial situation, you are better than at least 90% of the worlds population in terms of financial education.
This is because most people would rather watch TV than see what they are worth and how much they are underwater.
the good news is that you can easily shoot ahead of most of the humans roaming the earth today by spending no more than 2 hours analyzing your personal situation.
Trust me, this will help you by adding hundreds of thousands of dollars to your net worth down the road.
What I want you to do is this:
– check your credit score and rating: remember, your credit score tells the major financial institutions whether to allow you to take out a loan or not. Trust me, you will need to take out a loan in the years to come, irrespective of what your financial situation is. This means that it is directly in your favor to ensure that your credit rating and score is as high as it can possibly be. Since every single country has a different way of checking the credit score and rating, all you have to do is Google up the keyword term “check my credit score”.
doing this will give you plenty of options on how to go ahead with it.
Once again, a higher credit score will help you lower your interest rates on the loans taken out, allow you to take out higher loans and can simply increase your liquidity.
– Check the value of the personal residence: a piece of property is only as valuable as how much money people are going to pay for it. So for example, if you believe your primary residence is worth around $900,000, if most buyers are simply not willing to pay anything close to that amount, you will have to lower the value of the house in order to get it to sell.
to see how much your personal residence is worth currently, all you have to do is look at other similar houses in the region and go online and find out what their value is. This will easily give you the ballpark figure. If you want an exact figure, you can get a real estate agent or a property valuator to do the job for you for a couple of hundred bucks.
Once again, this information is vital since it tells you how much equity you have in the property and what your financial situation really is.
It does not really matter if you live in with your parents or whether you own the personal residence. What matters is that you know how you and your family is doing financially.
– Check the mortgage on your house: a simple call to the bank can let you know what the initial loan on the house was, what the monthly mortgage payments are, how much of that loan is still outstanding etc.
once again, this can help you immensely since once you have this information, you can ask the bank to give you a lower interest rate if it is warranted.
– Check out the credentials for your car: chances are, your family drives a vehicle which has not been fully paid for IE it has a loan outstanding on it. What most people do not remember is the percentage of the loan. For example, a Honda Accord 2015 touring normally costs you around $31,000 in Canada, if you are good at negotiating the price down. However, you will probably save thousands of dollars over the course of 5 years in terms of interest payments, if your interest rate is around 1.9% annually as opposed to it being around 3.9%.
So it is a good idea to call in and ask how much loan is still outstanding on the car, what the monthly payment is, how long it would take for the car to be yours (i.e. for you to pay down the amount).
You can easily do that by calling the car dealership and asking them to give you this information.