What is your net worth?
Your net worth is all your assets added up minus liabilities. Assets include things like property you own, investments such as shares or businesses and how much they would all be worth if you liquidated and sold them all today. Your liabilities are debts such as car loans, mortgages, credit card debt or student loan.
Take time today to work out your net worth
If you have been doing each day in the 21 Day Money Challenge you will already know how much debt you are in, so you know your liabilities.
Now, have a look at your assets. Write them all down. For example:
The value of your home but don’t take off the home loan from the total amount yet. Check recent sales in your area or listings on Real Estate to get an idea.
The value of your car if you sold it today. You can check this on Redbook and similar sites.
The value of shares you own.
The total of your superannuation.
The value of any business or other investments you have.
Add the value of all your assets together to get a total. Take your total and subtract the total of your liabilities from it. This is your net worth.
You can use a quick calculator to work out your net worth, such as this one on the Money Smart website.
Why care about your net worth?
Why should you care about this number? Your net worth is how much you are worth financially should you need to sell everything off right now. It is how you can determine how close you are to financial freedom and track your financial status easily.
Whether your net worth is in the minuses or a million dollars does not impact on who you are as a person though nor does it determine your value. It only determines your financial standing. Don’t let it discourage you if it’s lower than you thought or hoped. Back in 2012/2013 I was a homeless single mother. I was 28 and had always thought by that stage in my life I’d be financially stable, own a home (I sold mine in 2013 in the divorce) and that I’d be married, buying investment properties, having shares etc. By the end of 2013 my situation was completely different to what it was at the start of 2013 because I was aware of my situation and made changes.
Knowing where you are at financially means you can track it and set a goal to improve it. I have more information on net worth and how to increase it here.
How do you increase your net worth?
Two ways: decrease liabilities (reduce your debt) and increase your assets. If you are doing this challenge properly and you have debt, you will now have a plan to tackle that debt and should see it decrease rather quickly. In a few days, we will discuss investing further to increase your assets.
For now, decide what you want your net worth to be and how you will do that.
A few options for increasing your assets are:
– Open a savings account to start saving money.
– Open an account with acorn to start investing small amounts (you can set up a direct debit from as little as $5 to invest or have your account rounded down to make it easy for you). Plus get $2.50 to start with when you sign up here.
– Consolidate your superannuation and start contributing an amount from your pre tax income.
– Invest in shares, property and income
Note: along with increasing your assets, I think it is important you increase your cash flow and income. Work out how you want to be financially free, what sources of income you want to have and create a plan to make it happen. Get professional advice when needed as well.
How does your net worth stack up? What will you do to increase it?