This article was reposted from previous content. I thought it would be important to mention net worth as a motivational tool that helps us keep the big picture in mind. What’s your net worth?
There are only two options: up or down.
Your net worth is calculated by adding your assets minus your liabilities (debts). From this starting point, do you project your net worth to be moving up or down in the next month? How about the next year? Are you picking up the pace toward financial failure or financial freedom?
Calculating your net worth is one of the most beneficial financial exercises that you can undertake. Why? It forces you to be honest with yourself and pushes you to develop a game plan.
I am happy to report that our net worth is currently on the rise. By throwing money at debt, my wife and I are effectively moving our net worth up.
It is the realization that you can only move – and never stand still – that will compel you to ask which way you are moving. By any measure of time, your net worth is always on the move. Think you’re breaking even each month? You’re not. It’s an illusion. Here’s why:
- Your assets are either increasing or decreasing in value. If you have a car, it is probably depreciating (unless it is a classic car, in which case the value may go up with time). If you’ve owned a home for a year or more, it has probably lost much of its value due to our current economic situation (hang in there if you can, the value will go back up).
- It is very difficult to break completely even in your monthly income and expenses. Most likely, you are either going deeper into debt or you are saving up money. It’s one of the two, whether intentional or not.
I highly encourage you to ask yourself this difficult question. Is your net worth going up or down? If its going down, you might be wondering what steps you can take to turn this around. Here are some ideas:
- Create a budget. Seriously, you need to do this. Most Americans aren’t budgeting, and look where that has gotten them . . . nowhere but deeper into a recession. Create a budget, be realistic, and you’ll do well!
- Figure out a new source of income. New sources of income are all around, you just have to find one that suits you!
- Always be saving up money. Too often, people don’t save up much money into an emergency fund and then a crisis hits. Where do they run? The credits cards. Bad idea! If you save up money you’ll ensure that you won’t be tempted to charge it.
Another thing to consider is interest. Is interest eating you alive? What percentage of your work goes toward interest payments? Come up with a few steps to turn this around. Try eliminating your debt!
So, have you determined your net worth yet? Go get that calculator and get to work! Track it month to month, and create a vision for the future. You’ll be glad you did.
! John wrote two articles for the book: "Budgeting for Groceries" and "How Grocery Stores Work."
