Even if you detest the word “bitch” there’s something about the words “Rich Bitch” that turn you on. If you are like me, you have secretly longed to be just like her. Who wouldn’t? Today’s Rich Bitch is smart, sexy, and confident. In business, her intellect and charisma have opened doors and closed deals. In life, she gives a lot. But, don’t get it twisted, she gives what she wants, when she wants, and only on her terms. She expects nothing in return because expectation places others on the hook, and they cannot handle the pressure. She is a high achiever, and she is thorough. Oh, and by the way, her money life ROCKS! Every financial transaction she makes establishes how “rich” she is. She splurges on all the usual status symbols—designer handbags and shoes, expensive clothes, luxury cars, cell phone upgrades. And let’s not forget the best Peruvian virgin hair money can buy.
But hold up! Wait a minute! Somebody lied. This bitch ain’t rich! It would be easy to adopt the above-described Rich Bitch caricature as truth to those who are not familiar with the rules of wealth creation and asset accumulation. But that image, even though it bears a slight resemblance to the Rich Bitch, is not an accurate reflection of her. All women who wear expensive clothes and drive luxury cars are not rich. Everybody knows what rich looks like and anyone, even those who are struggling, can play that game. My great aunt used to say, “The truth is the light of the world.” So let me expose some truth. Having a lot of stuff is a dead giveaway to how much debt has been accrued, not how much wealth has been accumulated. It would be ridiculous to assume a woman is rich based on the amount of material possessions she has – especially when she is still making payments.
Riches, a.k.a. net worth or wealth is determined by calculating the total value of one’s assets and subtracting from that value the total debt owed against those assets. Assets include cash, stocks, bonds, and mutual funds. Income-producing real estate, as well as the resale value of automobiles, furnishings, and jewelry, may also be considered assets. Please note that your primary residence (house) is probably not an asset. As long as you are making payments to a lender, your home is your liability and your lender’s asset. Let me repeat, as long as payments for property or other tangibles with value are due to a lender or creditor, that property is considered the lender’s or creditor’s asset and your liability. Liabilities, a.k.a. debt, include car loans, credit card balances, student loans, mortgages, and other lines of credit. So if you want to know in black and white, if you are a Rich Bitch, take a moment and subtract the value of everything you owe (liabilities) from the value of everything you own (assets).
As an example, let’s take a look at Imani’s assets and liabilities. The fair market value of her home/primary residence is $200,000. The fair market value of her car is $19,000. Furnishings and other belongings would be valued at approximately $25,000. Currently, she has $80,000 in her savings account. Certificates of deposit (CDs) totaling $160,000 and a money market account balance of $373,000. She also has $496,000 in her 401(k), $120,000 in IRAs, and $8,000 in her employer’s stock. She has two rental properties valued at $50,000 each. Her debt includes the mortgage on her home/primary residence which is $182,000 and the mortgage on her two rental properties totaling $50,000. Her total debt equals $232,000. She has no credit cards or other personal debt. Once she subtracts her total liabilities ($232,000) from her total assets ($1,581,000), she learns that her current net worth is $1,349,000.
As you can see, Imani is a millionaire.
How did she do it?