All Families are a Million Dollar Business

As I have stated many times in my books and workshops, a family is really a small business. Most families will bring in a million dollars or more in their life time.

Three important questions any business needs to ask are:

• 1. Is the business worth anything? In the business world this is called a balance sheet. The balance sheet tells you how much the business is worth (equity). Or in the case of an individual how wealthy they are. The formula for this is--- Assets - Liability= Equity.

Assets are everything you own such as house, cars, recreation vehicles, savings, retirement money, cash, and anything else of value.

Liabilities are everything you owe on your house, car, credit cards, loans, etc.

Your Equity (or net worth) is how much money you would have if you cashed everything out and paid all your debts. This is calculated by subtracting all your liabilities from all your assets. This is what you have to show for your life and all your years of work.

• 2 Is the business making a profit each month and year? That is. Are they taking in more than they are spending. In the business world this is called a Profit and Loss Statement. Families use an Income & Expense form. This form tracks all income and spending to find where it went and how much is left at the end of each month. The bigger the difference between how much comes in and how much goes out determines how fast you are becoming poorer (spending more than comes in) or how fast you are becoming wealthy (spending less than what comes in). The only way to become wealthy is to spend less than you earn.

• 3. How much wealth do we want the business to accumulate? That is a plan for where we want to be in the future. And this includes spending less than is earned in the present.

An interesting exercise to do to find out how much you have to show for all the work you have done in your lifetime is:

1. Add up everything you have earned in your life (your annual Social Security statement has these numbers).
2. Add up everything you own and subtract what you owe.
3. Subtract this from what you earned. If it's a positive number great! If it's a negative number you need to make some difficult decisions?
   

Unfortunately, many discover they not only have no net worth but are in the hole. This means that after all those years of work they have less than when they were born. This can be both depressing and motivating

Something you can do today!
Think about it:
The best “stock market” investments I have doubles my money every six months. Twice a year I “invest” or stock up on toilet paper when it’s on sale for half price. Can your stock broker make you this much?