Is it net worth or equity? The answer is both!

equity

Author-Jeffrey Gitomer 2008

When I say “equity” what words come to mind? Most people think, “home,” or “home equity,” or some even “home equity loan.” Equity is the value difference between what you owe on something, and what that something is worth. A home, or a car, or a business.

There is also negative equity – you owe more that it’s worth. This is most prevalent in cars. It’s called being “upside down.”

How about “net worth?” What words come to mind? Most people think, “capital,” “money,” or “not enough.”

The other day I was talking with a salesman who was bragging about his “net worth,” and I asked him if it was the same as his equity.

Most people don’t think about net worth. They just work, spend, invest, or save. Adding it all up only occurs when someone asks for a financial statement or you’re about to retire and want to see if there’s enough.

Here’s the easiest way to think of the difference between the two: if you add up all your equities, and subtract all your debt, that will equal your net worth. Equity is determined one at a time; net worth can be the sum of many equity items.

The reality is that both equity and net worth are not just defined in terms of money, even though most people look at the terms and the results that way – especially accountants and bankers.

FACT: There is equity in everything – not just a home or a car. And the net worth of your life’s experiences can be measured in value that far exceeds money (although money is always nice).

How much are you worth? “Not enough” most will reply, but that’s because you are only measuring money. What is the equity that you have built? This is also about personal worth and personal equity. And, I want to challenge you that the more personal equity you build, the better your finances will be.

Here are a few equity areas to look at and question:

  • Relationship equity. Who are you building equity with, and what principles are they built on? What is the value of these relationships if they are lost? How are you building relationship equity with the customers and the people you both need (business) and love (family and friends)?
  • Business equity. Not just money, how about your goodwill and your career. Charity, community, employment. What are you doing besides making profit that leads to success?
  • Brand equity. Not just in your products or your business. I’m talking about brand you – your personal website, your blog, your weekly value-driven email magazine that is delivered to every customer and prospect. Branding is about positive promotion, not just advertising.
  • Lifelong learning equity. How much of a personal time investment are you making in learning to become better at what you do?
  • Sales knowledge equity. Are you better than the rest? Or are you just making your numbers – or maybe even less than that? If knowledge is strength, then watching TV and diverting your time away from building knowledge equity is weakness.
  • Library equity. What books are you thinking about getting and reading? Why are they still on someone else’s shelf? How much time do you devote to reading every day? As much as you should? As much as television?
  • Travel equity. Do you travel for fun, knowledge, business, and to “get away?” What have you learned? How has travel helped you grow?
  • Creative equity. Do you know that creativity is a science and you can learn to be more creative? Do you know that every one of your customers and connections would love it if you had an IDEA for them?
  • Reputation equity. How are you viewed in the community and the business community? How are you spoken about? And who speaks about you?
  • Sweat equity. Usually applied to entrepreneurs, it’s the time they put in building the business at little or no pay. But it really means anything you work hard for.
  • Sweet equity. Spending time doing what you love, with the people you love. It’s reduced tension, stress, and worry — increased fame, fortune, and fulfillment.

All of that equity adds up to your personal net worth – not measured in dollars, but in who you have become. And the value of that can be measured in your success, your relationships, your happiness, and your fulfillment. Hard to put a dollar value on that.

Jeffrey Gitomer is the author of The Little Red Book of Selling and eight other business books on sales, customer loyalty, and personal development. www.gitomer.com.

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