According to with Ted Bauman, there are three numbers that you need to know. These numbers should be on your mind all the time, and you should constantly know what they are. These three numbers are your credit score, your age, and your net worth. Just like you would not go on a traveling expedition without knowing how much food you need and taking that food with you, you should not enter retirement without knowing your net worth. The problem is that many people do not know their real net worth and miscalculate it.
The problem is that people confuse price with value according to thesovereigninvestor.com. Price can be used as an indicator of value, but they are two different things. You can buy something that costs a lot of money but that has no value for you. A silly little toy can cost a lot of money because it is in high demand, but the price can drop after the fad fades away.
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Because price can change over time, price is not necessarily a good indicator of value. For example, if you are calculating your house’s price in your net worth when you plan for retirement, you have to take into account the fact that you may not end up selling your house for a few decades, and at that time the price may not be the same.
In fact, studies show that in a few decades from now people will not have as much money and may not be able to afford to buy houses at the same price they are selling for now. This means that the price of your house may end up going down.
The truth is that when you plan for retirement, you have to take into account value and not just price. For example, if there is a reasonable doubt that the price of an asset will go down, you cannot rely on it when you plan for retirement. This does not only apply to houses. It can also apply to other assets, such as stocks according to linkedin.com.
The solution is to buy assets that will likely retain their value. This way, you can rely on them.
— Ted Bauman Guru (@Ted_B_Guru) September 23, 2017