Monday Morning Money Moment: April 10, 2017
Net Worth
Happy Monday everyone! Hope your weekend went well and you got some time to relax. Today’s topic is very important. It might be the two most important words on your financial journey. I’m talking about Net Worth. It should be everyone’s goal to increase their net worth. By doing so you can achieve everything you want in life and more. First I will describe what net worth is and then go over ways you can increase yours.
Net Worth is most simply defined as assets minus liabilities. Assets you have may include anything you own of worth, and no your cell phone doesn’t count. The most common assets people own are their home, investments, cash, items of value, etc. Liabilities are debts. Those can include loans, mortgages, consumer debt, etc. You calculate your net worth by taking everything you have and subtracting everything you owe. For many young people, this number will be negative. As you get older it should be your goal to have this number positive and constantly getting bigger. Here are a few tips on how to do this.
1) Pay off debt…..NOW
If you have student debt it should be your goal to have it gone no more than 3 years after you leave school. If you carry this debt around for many years it will hamper your ability to move going forward. Also, Consumer debt is a must to get rid of. Things like mortgages will be tougher to get. That leads me to the next tip.
2) Pay your Bills….Duh
Simply paying your bills every month means you aren’t incurring debt. Also by paying bills like your mortgage you are also building net worth. A mortgage is an asset, but only if you own your home. Consider your home like a bank account with a forced savings program. Every month you add to that “bank account” simply by paying that bill.
3) Saving and Invest your money….Regularly
Getting to zero debt wise isn’t enough. You have to build savings. Once in the habit of saving you must invest your money. A few weeks ago I did a post about inflation. It is crucial that you keep up with inflation by making your money work as hard as you do. Invest as much as you can and often.
Your Net Worth will dictate what your life looks like when you get older. Those with a small net worth will have a tough time during retirement. Those who grow their net worth will not see a dramatic change in lifestyle even when they stop working. Even someone who makes 25K a year will be a millionaire in their lifetime. (Age 25-65, $25,000 x 40 years = $1,000,000) What you chose to do with your money will decide your fate.
Thanks for reading my post today about Net Worth. Tune in tomorrow for the “Tuesday Tip of the Week.” Have a great week!
“When your self-worth goes up, your net worth goes up with it.” – Mark Victor Hansen
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Joseph James Francis is a Financial Advisor. You can find him on various social media platforms and at budgetboss.ca.