We all know how important building wealth is. But what is net worth?
And if the number is lower than you’d like, what steps can you take to improve your net worth? A lot of people find dealing with their finances overwhelming, especially when they’re trying to improve on them.
But there are steps you can take. And we can help.
If you’ve ever wondered about net worth, keep reading. We’re sharing with you everything you need to know to determine your financial status.
What is Net Worth?
Your net worth is determined by subtracting the value of what you own from your liabilities. In other words, the money in your home, investments, checking accounts, and retirement funds all work towards your net worth.
Your mortgage and debts such as credit card debt all count as liabilities.
Now that you know how to determine net worth, it’s important to know how to calculate net worth.
Start by adding up everything you own, including your assets. Then add up everything you owe, including debts and subtract that number from your assets.
Whatever is left over is your net worth.
How to Increase Your Net Worth
Once you know how to figure net worth, you can take steps to improve the number if they’re not as high as you’d like. Let’s take a look at a few money management tips to help you build up your net worth.
Pay Down Your Debt
Owing debt to credit card companies or other entities is not only expensive, but it’s also stressful. And that money you owe could be used to grow your net worth instead.
Pay as much as you can to pay off your debts as soon as possible. Some debts have penalties if you pay off the balance too soon so check before you make payments.
Start by paying off your debts with the highest interest rates. Then, when you’re finished paying off that debt, start tackling the smaller debts.
You can also try consolidating your debt by taking out a loan. Just make sure you find a lower interest rate than what you’re currently paying.
Look for ways you can reduce your monthly expenses. You can clip coupons to save on groceries.
You can cut the cable cord and watch your favorite tv shows and movies using a much less expensive streaming service. Cut subscriptions you don’t need.
A few dollars here and there may not seem like much, but they do add up. Every penny counts so it makes sense to cut anything that’s not absolutely necessary.
Max Out Your Retirement Contributions
If you work for an employer that offers a retirement plan, take advantage of it. If you don’t, look into opening up your own tax-advantaged account such as a Roth IRA.
These programs allow you to grow your wealth and save for your future. You’ll also pay less in taxes.
Create Your Own Wealth Tool Kit
What is net worth? To many, it’s the freedom to live the life of their dreams.
And we all deserve to live freely. We can help you get started with our money tool kit.
It’s all the resources you need in order to stop the debt cycle so you can build up your net worth. Click here to learn more.