When it comes to our finances, there are lot of different numbers that were all concerned about. We are oftentimes looking at the numbers in our checking account, savings account, various retirement accounts, and investing and trading accounts. All of these numbers are critically important, but theres one number in particular that can determine just how successful you are with building your assets for the future: your net worth. What Is Net Worth? is the difference between the value of what you ownyour house, retirement funds, investment accounts, checking account balance, etc. minus such liabilities as the mortgage, credit card debt and so forth. Net worth is an important number to keep it mind as it can help you determine just how much your debt can affect your future wealth, as well as highlight the areas you should focus on before retirement. P
Calculating your net worth is as simple as its definition. Take a look at everything you own, including assets that will be part of your retirement plan, such as your 401(k), stocks and investments. Make a separate list of your outstanding balances and debt and subtract that amount from the sum of everything you own, and whats left is your. P Sit down and take a few minutes to calculate the number. PAre you pleasantly surprised by the number or did you expect it your net worth to be higher? If so, dont fear! There are a few things that you can do to increase your net worth, starting today.
PP 1. Review Your Liabilities Take a detailed look at your liabilities. This should be an easy number to figure out as its simply how much debt you owe each month and in what form, such as your mortgage, credit card debt, and loan payment. Are there liabilities that you can eliminate or reduce? Reducing your debt is a big step in helping your net worth number increase! P 2. Review Your Assets You may not know exactly how much all of your assets are worth, or how that value is going to change, but you can get a round-about figure. Try not to leave any assets out. Remember, here are your main asset classes:P Primary residence:Pthe more equity you have in your home, the greater your net worth. Vacation home and rental property:Pusually paid for with cash, so this is definitely an asset youll want to count! Investments:Pstocks, bonds, mutual funds and tax-deferred retirement plans. Just remember to add the taxes on these assets to your liabilities. Collectibles:Part and antiquesthe market for these items will fluctuate, but you can always have an appraiser come help you. P 3. Trim Expenses The less money you spend, the more youre accumulating in net worth. Look at your current expenses and see if there are places that you can cut back. Remember, even a few dollars here and there can add up to a lot of money throughout the course of a year and longer!
P 4. Reduce Debt is the best way to increase your future wealth. First, you ll want to identify your high interest debt. Next, consider consolidating payments or simply increasing monthly payments, both of which are proven methods to reducing debt. 5. Pay Off Your Mortgage Consider and get the biggest lump sum off your books. POwning your home will become your biggest asset. 6. Review Annual Costs What annual costs are bringing your net worth number downand which ones dont you need? PTake a look at things like your insurance and healthcare premiums each year. Compare interest rates and see if any of these annual costs can be trimmed down. 7. Income Investing Income investing is a great way to increase your net worthif done right. PRead for details on an approach that I have been using with clients for years called The Bucket System. The main premise of this approach is that youll divide your liquid investments into four buckets: the cash bucket, the income bucket, the growth bucket, and the alternative income bucket. Disclosure:P The Balance does not provide tax, investment, or financial services advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors.
Past performance is not indicative of future results. Investing involves risk including the possible loss of principal. P When you hear the words Бnet worthБ do you think they only apply to the rich? Not so! Not so! Your net worth is an excellent gauge for you to determine how you are doing financially and what you can do to improve. Just jot it down on a piece of paper. This will take five to ten minutes. If you are not proud of your net worth, no one but you has to know. You can throw it away when you are done. HOWEVER, I highly recommend writing it down and going back to it in 3 months, 6 months, a year or even longer to see if things are improving. Why? Because most of the time, many things improve. Your net worth goes up as you pay your mortgage. Your net worth goes up as you pay a year of your car payment. How is this? When your assets increase in value and your debt goes down, your net worth goes up. As your net worth goes up, you ll be impressed with your accomplishments and want to do more to increase it even more. Chapter 1. 1. Current value of your home 2. Current blue book value of your car 3. Current value of household items (furniture, jewelry, etc. ) 4. 401K, IRA, Stock and other investments 5. Checking and Savings account. Good options for saving:. 6. Other The quickest way to get the value of your home is from your property tax statement (although it is not always the amount you would get from a sale of your home).
Another way is to find out the selling price of a comparable home in your area. You can always go online to find out the value of your home or car plus other valuable items. 2) Now add up all of your debt. 1. Mortgage 2. Car payment 3. Student loan 4. Credit cards 5. Loan to Aunt Sally (yes, please count all of it! ) 6. Other Now get a total. Is it a positive or negative total? Anything positive is a step in the right direction. Now just strive to improve it and check it every few months. Of course it will be a lower number if you are in your 20s. You may have student loans and a new job. As you get into your 30s, it will get better, but slowly counts too! You start investing in a home and a reliable car. As you get into your 40s, if you keep a close eye on it, your assets will probably be significantly more than your debt. The important thing is to come back in a few months to take a peek at it. If it is better than it was when you first did it Б you are succeeding! If it is not, just take a few steps to get it back in the right direction. Just remember that a slow and steady race is positive. Make smart decisions but donБt forget to have fun along the way. Enjoy your family. Invest in your future. You are clever enough to make a lifestyle that will work for you and your family!