Rhodes Brothers

How Millionaires Think About Net Worth

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“Net worth isn’t just a number for the elite—it’s a mindset that can transform your financial future.” This powerful truth lies at the heart of how millionaires think about net worth, and it’s a perspective that’s within reach for anyone willing to adopt the right strategies.

Millionaires Net Worth

In this guide, we’ll delve into the millionaire mindset surrounding net worth, exploring how these high-achievers view their finances not just as a balance sheet, but as a dynamic tool for creating freedom, impact, and legacy. We’ll uncover the strategies they use to build, protect, and grow their wealth, from leveraging assets to managing risk and controlling lifestyle inflation.

Two-thirds of millionaires are self-made, according to a 2019 study by Wealth-X and a study by Fidelity Investments.  This statistic underscores a crucial point: millionaire-level wealth is often the result of consistent, intelligent financial habits rather than luck or inheritance.

As John S. Rhodes of the Rhodes Brothers aptly puts it, “Building substantial net worth isn’t about making more money—it’s about thinking differently about the money you have. It’s a shift in perspective that can change everything.”

TL;DR

  • Millionaire-level wealth is attainable with the right mindset and strategies
  • Key focus areas include viewing finances as a business, prioritizing asset quality, and effective use of leverage
  • Risk management, tax efficiency, and lifestyle control are crucial components
  • Millionaires view net worth as a tool for freedom, impact, and legacy
  • Continuous learning and a long-term perspective are essential for building wealth
  • The millionaire mindset is accessible to anyone willing to adopt these principles and habits

How Millionaires Think About Net Worth

Millionaires have a unique perspective on net worth that sets them apart. This mindset significantly contributes to their financial success and wealth accumulation. Let’s explore the key aspects of how millionaires approach net worth, including practical tools and examples.

Focus on Assets, Not Income

Millionaires understand that true wealth is built through assets, not just high income. They:

  • Prioritize acquiring income-generating assets (e.g., real estate, businesses, stocks)
  • Aim to have multiple streams of passive income
  • View their skills and knowledge as intangible assets to be developed

Example: Instead of spending a $50,000 bonus on a luxury vacation, a millionaire might invest in a diversified portfolio of dividend-paying stocks or use it as a down payment on a rental property.

Tool: Robinhood or Vanguard for easy stock investing, Fundrise for real estate investment trusts (REITs)

Focus on Assets Not on Income

Net Worth as a Scorecard

For many millionaires, net worth is more than just a number – it’s a way to track progress:

  • Regularly calculate and monitor their net worth
  • Set specific net worth goals and create plans to achieve them
  • Use net worth as a motivation tool for financial decisions

Tool: Personal Capital or Mint for tracking net worth automatically

Example: Setting a goal to increase net worth by 15% annually, then breaking that down into monthly investment and savings targets

Long-Term Perspective

Millionaires think in terms of decades, not months or years:

  • Make financial decisions based on long-term impact on net worth
  • Understand the power of compound interest over time
  • Are willing to sacrifice short-term pleasures for long-term financial gain

Example: Choosing to reinvest dividends instead of spending them, understanding the exponential growth over 20-30 years.

Tool: Compound interest calculators like the one offered by Investor.gov

Net Worth vs. Liquid Assets

Millionaires recognize the difference between net worth and available cash:

  • Balance illiquid assets (e.g., real estate) with liquid investments
  • Maintain emergency funds and cash reserves
  • Understand how to leverage illiquid assets when needed

Strategy: Keeping 5-10% of net worth in easily accessible, low-risk investments

Example: A millionaire with a net worth of $2 million might keep $100,000-$200,000 in high-yield savings accounts or money market funds

Tool: Online high-yield savings accounts like Ally or Marcus by Goldman Sachs

Net Worth as a Business

Millionaires often view their personal finances like a business:

  • They treat their net worth as a company’s balance sheet
  • Regularly audit their “personal business” for inefficiencies
  • Make strategic “investments” in themselves and their assets

Example: A millionaire might invest $10,000 in an advanced coding bootcamp, seeing it as an investment in their most valuable asset – themselves.

Tool: QuickBooks Self-Employed or FreshBooks for personal finance tracking and analysis

Quality of Assets Over Quantity

Millionaires focus on the quality and performance of their assets:

  • Prioritize assets with high return potential
  • Regularly review and optimize their asset allocation
  • Are willing to sell underperforming assets, avoiding emotional attachments

Strategy: Conducting an annual review of all investments and assets, measuring their performance against benchmarks

Example: Selling a rental property that’s only yielding 3% annually to invest in a business opportunity with projected 15% returns

Tool: Morningstar for investment research and analysis

Leverage as a Tool

Many millionaires understand how to use leverage effectively:

  • Use “good debt” to acquire assets that appreciate or generate income
  • Understand the risks and rewards of leverage
  • Maintain a healthy debt-to-asset ratio

Example: Using a $200,000 mortgage to purchase a $250,000 rental property, understanding that the tenants will effectively pay off the loan while the property likely appreciates.

Tool: Mortgage calculators like those offered by Bankrate or NerdWallet

Actionable Steps to Think About Net Worth Like a Millionaire

Beginner Level

  1. Start tracking your net worth
  • Download a free app like Mint or Personal Capital
  • Input all your assets (savings, investments, property) and liabilities (debts)
  • Set a reminder to update this monthly
  1. Create your first passive income stream
  • Open a high-yield savings account
  • Invest in a low-cost index fund through platforms like Vanguard or Fidelity
  • Consider dividend-paying stocks or REITs for beginners
  1. Educate yourself
  • Read one personal finance book per month (start with “Rich Dad Poor Dad” by Robert Kiyosaki)
  • Follow financial experts on social media
  • Subscribe to the Rhodes Brothers YouTube channel for regular financial insights
  1. Set a “freedom number” goal
  • Calculate your annual expenses
  • Multiply this by 25 (based on the 4% rule)
  • This is your initial target for financial independence

Intermediate Level:

  1. Diversify your income streams:
  • Start a side hustle in your area of expertise
  • Invest in peer-to-peer lending platforms like Prosper or LendingClub
  • Consider real estate crowdfunding through platforms like Fundrise
  1. Optimize for tax efficiency:
  • Maximize contributions to tax-advantaged accounts (401(k), IRA)
  • Learn about tax-loss harvesting
  • Consult with a tax professional to create a tax-efficient investment strategy
  1. Leverage good debt:
  • If you have a stable income and good credit, consider using a mortgage to invest in rental property
  • Learn about business loans for expanding a profitable side hustle
  • Implement the “pay yourself first” strategy:
  • Automatically direct a percentage of your income to investments before budgeting for expenses
  • Gradually increase this percentage over time

Advanced Level:

  1. Create a personal board of directors:
  • Assemble a team of financial professionals (accountant, lawyer, financial advisor)
  • Network with successful individuals in your field
  • Join or create a mastermind group focused on wealth building
  1. Explore advanced investment strategies:
  • Learn about options trading for hedging and income generation
  • Consider angel investing in startups
  • Investigate opportunities in private equity or venture capital
  1. Implement sophisticated tax strategies:
  • Explore setting up a family limited partnership or trust
  • Consider charitable giving strategies like donor-advised funds
  • Investigate opportunities for qualified business income deductions
  1. Focus on legacy and impact:
  • Develop a comprehensive estate plan
  • Create a family mission statement for wealth
  • Explore establishing a private foundation or charitable trust

Regardless of your level, remember these key principles:

  • Always focus on increasing your knowledge about personal finance and investing
  • Regularly review and rebalance your portfolio
  • Stay disciplined and avoid emotional financial decisions
  • Think long-term and be patient with your wealth-building journey

By implementing these steps and continuously educating yourself, you can start thinking about net worth like a millionaire, regardless of your current financial situation. Remember, building wealth is a marathon, not a sprint.

Common Mistakes to Avoid When Thinking About Net Worth

  1. Focusing Solely on Income
  • Solution: Shift focus to building assets and multiple income streams.
  • Action: Set up automatic transfers to investment accounts on payday.
  1. Neglecting to Track Net Worth
  • Solution: Use a net worth tracking tool and update regularly.
  • Action: Set up a Personal Capital or Mint account this week.
  1. Confusing Net Worth with Self-Worth
  • Solution: Set non-financial goals alongside financial ones.
  • Action: Write down three non-financial accomplishments you’re proud of.
  1. Ignoring Liabilities
  • Solution: Include all debts in net worth calculations and develop a reduction strategy.
  • Action: List all debts and create a payoff plan, starting with high-interest debt.
  1. Overvaluing Depreciating Assets
  • Solution: Use realistic, current market values for assets like cars.
  • Action: Research your car’s current market value and adjust net worth calculation.
  1. Neglecting Tax Implications
  • Solution: Consider after-tax value of assets and utilize tax-advantaged accounts.
  • Action: Review investment accounts to maximize tax-advantaged contributions.
  1. Comparing to Others
  • Solution: Focus on personal progress and goals.
  • Action: Set a personal net worth goal based on your own circumstances.
  1. Overlooking Insurance and Risk Management
  • Solution: Regularly review insurance coverage and implement protection strategies.
  • Action: Schedule a review with an insurance professional.
  1. Neglecting Estate Planning
  • Solution: Create or update estate planning documents.
  • Action: Schedule an appointment with an estate planning attorney.
  1. Failing to Invest in Personal Growth
  • Solution: Allocate resources to education and skill development.
  • Action: Invest in a course or training program to develop a valuable skill.

Frequently Asked Questions

What is net worth?

Net worth is the total value of your assets minus your liabilities.

How do I calculate my net worth?

Sum up all your assets, sum up all your liabilities, then subtract liabilities from assets.

What’s a “good” net worth?

By age 30: 0.5x annual salary; 40: 2x; 50: 4x; 60: 6x. Individual circumstances vary.

How can I increase my net worth?

Increase income, reduce expenses, pay off debt, invest wisely, acquire income-generating assets.

Should I include my home in net worth?

Yes, include its current market value and any mortgage debt.

How often should I calculate net worth?

Monthly or quarterly is sufficient for most people.

What’s liquid net worth?

Assets easily converted to cash, excluding things like real estate or retirement accounts with penalties.

How does debt affect net worth?

Debt directly reduces net worth. Focus on eliminating high-interest debt.

What if I have negative net worth?

Focus on increasing income, reducing expenses, paying off debt, and building assets gradually.

How does retirement planning relate to net worth?

Your retirement goal is often a target net worth that can sustain your lifestyle without employment income.

Mastering Your Net Worth Journey

Key takeaways:

  • Net worth is assets minus liabilities, providing a snapshot of financial health.
  • Regular tracking and calculation are crucial for financial progress.
  • Focus on both increasing assets and reducing liabilities.
  • Avoid common mistakes like neglecting debt or overvaluing depreciating assets.
  • Personal growth and education play a vital role in long-term wealth building.

Actionable tips to implement immediately:

  • Calculate your current net worth using a simple spreadsheet or app.
  • Set up automatic transfers to savings or investment accounts.
  • Create a debt repayment plan, prioritizing high-interest debt.
  • Review your insurance coverage to protect your assets.
  • Invest in a skill that could increase your earning potential.

Building net worth is a marathon, not a sprint. Start small, stay consistent, and focus on progress over perfection. Every step forward, no matter how small, brings you closer to your financial goals.

Take action today: Choose one of the actionable tips above and implement it within the next 24 hours. Your future self will thank you for starting this journey now.

For more valuable insights and strategies to boost your financial success, we encourage you to check out the Rhodes Brothers YouTube Channel. Their expert advice can help accelerate your wealth-building journey. View their latest videos and subscribe here: 

Your financial future starts now – take that first step and keep moving forward!

Resource List

Books

Podcasts

Blogs and Websites

Tools and Apps

  • Personal Capital – for net worth tracking and investment management
  • Mint – for budgeting and net worth tracking
  • YNAB (You Need A Budget) – for detailed budgeting
  • Quicken – for comprehensive financial management
  • Tiller Money – for spreadsheet-based financial tracking
  • Wealthfront – for automated investing
  • Betterment – for goal-based investing
  • Acorns – for micro-investing and saving spare change
  • Credit Karma – for credit score monitoring
  • Robinhood – for commission-free stock trading

Courses

YouTube Channels

Forums and Communities

These resources cover a wide range of financial topics and cater to different learning styles and preferences. They can provide valuable insights and tools for anyone looking to improve their understanding of net worth and personal finance in general.

The Rhodes Brothers Library

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