Have you ever wondered where you truly really are financially? Or what does it take to be classified, if you will, as upper class or middle class? Or what does it even mean, and why does it seem like people are stuck? Well, if you're feeling like your financial situation just doesn't match the life you want, then this episode's for you. Because today I'm going to break it down for you. Today I'm going to dive into the truth behind
net worth and what it actually means. What are the real numbers that might put you in the upper class or middle class? And not for a ranking standpoint, but for an understanding of what you need to do to move you down the path to the financial freedom that you deserve. I want to have an honest conversation about net worth. Not as a place of judgment, because maybe your net worth isn't bigger than the next person or whatever, but as a tool to understand where you are financially and where
you need to go financially. Because net worth is actually more than just a number. We'll talk about how the number calculates, but it actually allows you to understand what you need to do and the life that you want to have. So no matter where you are, no matter what the scale, no matter what the discussion, today's episode is all about clarity. It's all about you understanding. I'm going to talk about, you know, what ranks
as lower class, middle class, or upper class. None of that actually matters in the sense of I don't care where you're at. I care that you're in the game. And then we can move you from wherever you're at to wherever you want to be. That's the goal of the game. But I think we need to have a real conversation around this to do so. All right, so let's just talk generically about what is net worth and how do you
calculate it? Well, net worth, simply put, net worth is everything you own, which we call assets, okay? Everything you own, minus everything you owe, which we call liabilities. Okay? And the net of that is net worth. Okay, now listen, I get it. Your net worth. If you did that, you said, I'm going to add up everything I own. I mean, we're talking about home, cash, investments, clothing, cars, all that stuff. And then I'm going to subtract out everything I owe.
Mortgages, credit card debt, student loan debt, personal loans, those kinds of things, and see what's left. Now, y'all, I get it. Some of you might sit back and go, it's negative. It's okay, it's okay. I started negative, okay? I had a heap of debt when I came out of college, I had a negative net worth. So it's not where you start, it's what you do from where you start and do that. So what I'd love for you to do is to take a moment and actually do the calculation and see where it's at
for you. Now, there are different kinds of net worth. Because one of the net worths that we track in any of my programs, when I'm working with my clients, when we build their money machine master plan or in their money machine blueprint, all that type of stuff, we focus on investable net worth. That's the net worth that has the ability to support you in the future. So things like clothes and cars and things like that, we don't count in the
investable net worth. But I want you to just do the total net worth. So you start to understand it. Now let's just see where, based on data, based on statistics, where that might put you, not to judge you, but just so you understand what, how stats show lower class, middle class or upper class and what things are happening at that stage, more importantly, so we can then navigate beyond that. So the lower class, typically the net worth is
under $50,000. But bottom line is, unless you're born into it, and I wasn't born to it, I'm a son of an immigrant, you will start in this category. You will start with negative net worth, you will start with zero net worth, you'll start with very little net worth, and that's okay. And it's primarily because you haven't taken the time to build enough assets and you probably have a fair amount of debt. You haven't built the muscle, the behaviors,
the skill sets necessary to build wealth. It's why I actually did an episode on why the first hundred thousand dollars of net worth is one of the biggest pivot points for you in your wealth building journey. Because it forces you to develop the skills, the habits, the mind, mindset and all the stuff you need to go to a million to 10 million to 5 million and everything. But it's the beginning, it's the beginning. Middle class, when you look at some of the data, is between 50 and 500,000. Okay?
And this is typically someone that owns a home, they have some retirement savings, they're relying, they have a reliable income source, those kinds of things. And so that's where I would terminate middle class or the statistics will show it. And then upper classes, anything above 500,000. Now look, if you live and own a home in an expensive area, you could easily be considered upper class, but you might still be feeling like, I can't pay my bills. It's because we're what we call
house rich and cash poor or investment poor. So. So it's important to understand where this all plays out. Now, like I said, I don't think this matters any other than the fact to understand that there is this ladder you're going up. But the ladder I want you to climb isn't the ladder of statistics, it's the ladder of dreams. It's the ladder of what you want in your life. So I want you to just kind of look at your net worth without judgment and to sit back and
say, huh, this is where I'm at. Great, now we can move from there and we'll talk about specifically what to do and where to focus. Because here's what I do know. Net worth has an emotional weight to it. We tend to look at the numbers and I tell you not to judge yourself, but I find myself, even when I look at my net worth, I find myself judging myself. I find myself either sitting in pride or shame or insecurity. But all of it, even if it's a positive, even if I'm prideful about
it, it's still judgment. What I want to do is look at it as a data point. It's just one measure of your financial health. It doesn't reflect you as the value of you as a person, your potential, where you're going. It's simply a point on a map to your journey to
financial freedom. It's just a point. And the power really isn't in comparing yourself to others, whether it's social media, whether it's Instagram media, whatever the data, the statistics, but the power in it is using the information to make proper, strategic financial decisions to move you towards your financial freedom dream. That's it. Because you're here to live your life. Not what you see on the media, not what social media says, not what your neighbor says, not even what your parents
say. Okay, you're here to live your life. And so we want to use this as a tool to measure where we are on the path to the destination that we have set. Now, you might find that there are things that come into play to make this, make this happen. And I think that we can, we can look at it. Now, depending which
ranking you are, you might see some characteristics. For instance, if you are below 50,000, where they say, oh, it's lower class, often you're struggling with high Interest, debt, payday loans, credit cards, living paycheck to paycheck. This may be something that you're feeling. There is a way out of it. The first step to getting out of it is to start to get some sort of cushion. We call it a comfort fund in the wealth priority ladder. It's in chapter 12 of my book, but it is
giving you a little bit of breathing room, a little bit of oxygen. And it might mean that you take on a side gig or you sell something that you're not using. If I went in, I grabbed one of the cameras that I'm not using, I could sell it on Facebook, marketplace, give me some breathing room. The comfort fund that we try to get our clients to start with is I want fifteen hundred dollars or one month's
expenses. It's not an emergency fund, but it is, it is a place where if something unexpected happens, like you have a medical emergency, you have the money for the deductible or a transmission goes up, you have the money for that. But in this space, in this level, when you're down here, it's difficult because you're, you're paycheck to paycheck and high interest debt, you're buried with that, that high
interest. If you have high interest debt and you're trying to figure out how to get out of it and you don't have a debt payment plan, that's the first step. And what I want you to do is go to melabraham.com no debt, get the debt breakthrough calculator. It's totally free. It's a resource. I want you to put your debt in, I want your payments in there. I want you to figure
out what plan works. There's a short training with it and then get yourself, get yourself out of it because then we can get you to the middle class. And this is a place where at this ranking, at this level now all of a sudden you're starting to put money away. You may have a home, you may have some equity in the home, but you have some retirement savings. You can rely on regular income. You are now shifting your eye more towards investing and that type of thing.
So in this, in these two bottom tranches, if you will, I don't like using the word class, but in these two bottom levels, where you, where you want to spend some time is investing in your skill development because as your skill develops, your ability to earn goes up. And as your ability to earn goes up, now all of a sudden you have a bigger shovel of income to throw at the Debt to throw a building net worth, to throw at wealth building. And that leads me to.
Then when people get to that higher level of 500,000 or more, then most of the time you are where I say, you have critical mass in your portfolio, unless it's all in real estate and that you are have a diversified portfolio. You are consistently investing, you're consistently putting money away, you're building savings, you're paying down debt, and you have a consistent income stream. And now this is where all of a sudden, you will see the big shifts
in your net worth over time. All right? So when it comes down to this is what we're dealing with, I want to walk through real quickly what really matters and some actionable steps that I want you to take to really get control of your net worth, to know where you're at and to move you faster and more furiously towards your financial freedom. And it's the financial freedom you deserve, frankly. So the goal of wealth, okay, so the goal of wealth is not to just hit a number.
Now, I did this early on. I just kept putting a number out there. It was a million bucks, okay, then it was 5 million, then it's 10 million, then it's 15 million. It became this arbitrary target that I put out there that had no meaning, had no basis, and had no emotion. There was no graciousness, there was no gratitude. There was nothing to it. It was
just a number. So the goal of wealth is. Isn't just hitting a certain number, but the goal to wealth is to achieve financial freedom, to live a life of choice, to know that I have separated my ability to earn my. The efforts to earn it from the earnings themselves. In other words, I get to do this by choice. It's like, I look at it, I'm blessed. I get to do this by choice, and I want you to do the same. We end up in that space. So the objective of building wealth
is to have freedom of choice. And net worth can give you that. It's the ability to live the life you want, when you want, where you want, how you want. True wealth isn't defined by the bank balance. I tell people as I'm speaking, I said, you will not find the richness in your life in a bank account. You will find it in your heart, in your soul, in your purpose, and your dreams. Okay? That's what it is. So true wealth is about having the freedom to pursue the things
that are meaningful. Think about it this way to give you a perspective of where most people are 40%, 4 0% of Americans say that they would struggle to cover a $400 emergency expense without selling something, without going into debt, without borrowing. That shows that just taking small steps, building a comfort fund, building an emergency fund, falling the wealth priority ladder is going to put you head and heels above the majority
of the people out there. 40%. As soon as we have a comfort fund in place that can cover it, you're better than 40% of the people out there. All right, so let's get you there. How do we get you there? I want to give you five steps to take. Okay? The first step is this. Okay, the first step is this. I want you to track your spending. I know this could be painful. And you go, I don't want to know where my money's going, y'all. Until we know where
it's going, we can't direct it where it's supposed to go. You can't manage it if you don't measure it. The bottom line is we got to know where the money's going. So I just want you to log it. Log it for 30 days. Get whether you're using an app, whether you're using a spreadsheet, whether you're using a pencil and paper. Okay? Doesn't matter. I use Quicken for all of my stuff and QuickBooks and that kind of thing. But I've used
spreadsheets, and there's different budget apps you can use. But the bottom line is, I want you, for 30 days, track your spending. Every dollar that goes up, every dollar that goes out, I want you to know where it's going without judgment. This is about awareness. This is about knowing. This is about awareness. Then number two, I'm going to split it into. Into two things. So I'm going to say two A is I want you to get that comfort fund. Okay? That's $1,500 or one
month's expenses. That means that if you got to take on a project, if you got to do overtime, if you have to take on a side gig temporarily, if you have to do any of that, if there's things around the house that you're not using that you can sell to get that lump sum, I want you to get $1,500 or one month's expenses. Put it away in a high yield savings account. Put it away in a high yield savings account. Now that's 2A. That's the first step, because that.
All that's doing is like you're. You're sucking for air, maybe. And this is giving you just that. That little breath that you can take. Okay. Now to be, to be. The second part of this is to build what we call a peace of mind fund. Okay. It's part of the wealth priority ladder, but some people will call it an emergency fund. This is something that a lot of commentators, a lot of people will say, oh, you know, three to six months, three to six months is not enough.
I want you to target a minimum of nine months to 18 months, nine to 18 months of expenses in a high yield savings account set aside for opportunities and protection. That's what we're doing it for, liquidity, that you can take and can take advantage of opportunities when they present themselves and keep you safe when something unexpected happens. Okay? And look, this is going to take a little time, so
you have to be deliberate. This is why we need to know the spending. You have to be deliberate and disciplined to keep putting money away on a regular basis. Okay? Number three, I want you to start investing regularly. Notice that what I'm saying to you is I'm not telling you, oh, you gotta invest $500. I want you to exercise the investing muscle. It's a behavior. It's a behavior
to make sure that you're investing. And what I. And so I don't care if it's $5, if all you can spare is $5, I want that $5 going into a, into an account that you can invest into some sort of low cost, low fee ETF index fund. But what you're doing is you're exercising the habit, you're exercising the muscle, and you are creating the investing behaviors of someone that builds wealth. And over time, the $5 becomes 10
becomes 100, becomes a thousand becomes 10,000. But if we don't start with the 5 because we think it's not enough, then what? We wait until we make more money. But what happens is that our spending, our lifestyle tends to expand to the money that comes in. I don't want to do that. That's why we have to start with a very deliberate effort of knowing where our money's going to make it happen. But I need you to get into the investing game, even
if it's small. The key is that you are on the field, you're playing the game, you are investing on a regular basis. And then, and then you look at it and say, ah, okay, along with investing, and I do this differently than most also is I want you to pay down what I call destructive debt. Now there are people out there that say you don't invest until you're out of debt. I don't agree with that because your debt management muscle
is different than your investing muscle. There are two different muscle groups. You know, it's y'all, it's like. It's like the dude that goes to the gym and all he does is work his upper body. As long as he's wearing sweats, he looks fine. But when he goes out there in shorts, toothpick legs, big upper body, I don't want you to only know how to pay off debt. I need you to know how to pay off debt and manage debt and to build wealth at the same time. So here's what I do and
what I can tell people do. Let's assume that you have an extra hundred dollars, an extra $200, let's call it $200 for this example, you have an extra $200. That $200, you can put it in investing and debt paid out. I don't care what the percentage is. I just care that you're doing both. You might decide to put. Put, you know, 80% of it towards debt pay down and 20% towards investing. That's fine. You're exercising the muscle group. That's the key to
doing it, that you're getting out of debt on a regular basis. And then the last piece, the last number five is I want you to skill up and diversify your income. Here's what I mean by this. The less dependent you are on a single stream of income, the more solid the foundation of your wealth building is. Okay, when I got diagnosed with cancer, there was certain streams of income that I shut down. I chose not to travel and speak. I chose not to. To do certain things. I shut it
down. But I had other streams of income that picked up the ball and ran and was. Was good for it. That's what we need to do. But along the same lines, I want you to skill up. Because the other side of it is that as you skill up and you become more valuable to your customers, to your clients, to your bosses, to your companies, you go from valuable to becoming invaluable. And when you're invaluable, you have more security in your business, in your job, than those that are just getting by
and doing just enough. All right, those are the five things I want you to start with. Okay? Remember this. The objective of building net worth is not to have a data point and statistic or to compare to others. It is a snapshot of where you are in that moment, and it is a reflection of your financial potential. It's going to allow you to focus on Building that net worth over time in a way that's going to give you the financial freedom so you can live a life of choice. If you're not sure how to
do it, y'all, it's a shameless plug. But get my book. Building your money machine, because I break it down for you. I give you the systems, I give you the process, and I give you the frameworks to make it happen. Okay? It's just. It's not just numbers on a balance sheet. It is your financial future on a map. That's what we're doing. That's what we're trying to do, and that's what you need to do to find
your path to financial freedom. All right? I hope you found this helpful. I hope that this kind of puts things in perspective and allows you to take control of your financial future and say, I'm in the game now. I've got control. I don't care where I'm starting, but I care that I've started and I'm gonna keep going. Stay on this journey with me. I will help you every step of the way. I will
keep putting content out there. If you have not subscribed to the channel, stay on the journey, subscribe, share it, do this with someone else. Let's make it happen together, all right? Let's build this journey together towards wealth, towards freedom, and towards living life on your terms. All right? Till I get a chance to see you in another episode or on the road to financial freedom. As I always say, always, always try to live a life that helps you. Thank you for listening to
the Affluent Entrepreneur show with me, your host, Mel Abraham. If you want to achieve financial liberation to create an affluent lifestyle, join me in the Affluent Entrepreneur Facebook group. Now by going to melabraham.com group and I'll see you.