When you hear the words “net worth” 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.
Net worth = All assets (-) minus all liabilities
First add up all of your assets (you may have many more):
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: savings accounts.
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.
Now add up all of your debt.
2. Car payment
3. Student loan
4. Credit cards
5. Loan to Aunt Sally (yes, please count all of it!)
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 – 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 don’t 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!