Grow Your Net Worth

Your net worth is one of the most important measurements of your financial health. It determines how easily you can achieve your financial goals and how comfortable you will be in retirement. 

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What is net worth?  

Net worth is the sum total of all your assets (property, savings, investments, etc.) minus any debts and other liabilities you may have. In other words, it’s what you own free and clear. 

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There are two main components of your net worth: assets and liabilities. Assets are anything that has value and can be converted into cash. This includes savings accounts, investments, real estate, and personal property. Liabilities are anything that you owe money on, including credit card debt, student loans, and mortgages.

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To calculate your net worth, simply subtract your total liabilities from your total assets. This will give you a snapshot of your financial health. If the number is positive, you have more assets than liabilities and are in good financial shape. If the number is negative, you have more liabilities than assets and need to take steps to improve your financial situation.

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Why your net worth matters

It’s a measure of your financial health: Your net worth is one of the best measures of your overall financial health. It can give you a good idea of how prepared you are for retirement and other financial goals. 

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For example, your net worth has nothing to do with your salary. There are plenty of people who make $100,000 a year but have over $200,000 in debt, and $1,000,000 in total assets that would like to retire asap. Although $1,000,000 sounds like a nice number, you no longer have a $100,000 salary to cover expenses if you retire. In this example, your salary has nothing to do with your net worth. 

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Net worth is what you'd have leftover today if you had to cash out all your assets and pay off all your debts.

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How to improve your net worth

If you don't know how much your net worth is, take a moment to review the value of everything you own minus your debts.  There are two main ways to improve your net worth: by increasing your assets or by decreasing your liabilities. 

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To increase your assets, you can save more money, invest in property or stocks, or start a business. To decrease your liabilities, you can pay off debt, such as credit cards and student loans. You can also work on reducing your expenses so you have more money to put towards savings and investments.

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Ensure your net worth is increasing

After you have an estimated figure, you can ensure that your net worth is increasing year over year. High net worth can help you achieve financial independence: A high net worth is one of the key components of financial independence. Financial independence is when your investments and other sources of income are enough to cover your living expenses, without having to work. This doesn’t mean that you never have to work again. But it does mean that you have the option to retire or pursue other interests, without worrying about money. The sooner you start, the better off you’ll be. 

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Invest for income

A good way to increase your assets is to invest for income and think long-term. This means investing in things designed to generate a return, such as stocks, bonds, and real estate. These investments can provide you with an additional source of income, which can help you reach your financial goals faster. If done right, you may accumulate enough income from investments to supplement your lifestyle!

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If you own a home then you have equity, which is the portion of your home that you own outright. Your home will likely increase in value over time, so your equity will increase as well.

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No matter where you are in your financial journey, it’s important to keep track of your net worth. This will help you make smart decisions about your money and ensure that you are on track to reach your financial goals. And finally, remember to enjoy your money! After all, that’s what it’s for.

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