When you take into account what your net worth is, you look at all your assets and subtract your liabilities. Atlas — you get net worth. But, why is it important?
Let’s dive into it. Net worth is important to track because it allows you to see which areas your money is going towards. For example — let’s say you purchase a home and it’s your primary residence. You put 20% down, and the rest of the home was financed by obtaining a mortgage over a thirty year period. The money you owe towards the mortgage, counts as a liability. Being it’s debt — good debt in my opinion. As you pay down the debt, you’re building equity. But, still debt.
Here, below I’m going to be discussing five ways on how you can skyrocket your net worth exponentially, and achieve the results you’re looking for in your financial life.
1.) Eliminate debt
In the above paragraph, the conversation of debt came about. Mortgage debt is still debt — but again, good debt to me. To someone else, they might want to pay off their mortgage as soon as possible. Student debt — another good debt to me. Let’s talk about not so good debt.
Credit cards. The average credit card balance in the U.S. ranges from $6K-8K according to CardRates.com. Another shocking number to take note of — consumers alike owe almost $900 billion in credit card debt.
Wow…
Think about that for a second. $900 billion! Using credit cards should be taken with precaution. I use the saying — if you can’t afford it with cash, then don’t use a credit card. Pay balances off in full each month and track your spending. I personally use my credit cards all the time, because it actually makes is easier for me when tracking spending at the end of the month when I pay it off in full. Whatever works for you. But, come up with a plan if you have significant consumer debt on your credit cards.
2.) Manage money and educate yourself
My friends that are financial advisors will get mad when I say this. But, when you’re young — you don’t need a financial advisor. Advisors don’t tell you expense ratios of funds they put you in — then on top of that the fees they charge. I am not saying it’s wrong to use an advisor — but know who you’re getting into bed with. Know the numbers, and ask the questions. I’ve used Vanguard for years now — where I have my brokerage account, IRA, and Roth IRA. Vanguard is known for their low expense ratios in mutual funds — and in my opinion the best mutual fund company in the world to use when investing your money.
If you spend the time educating yourself and asking the right questions — you can learn how to manage money on your own. I see many people not spending the time to educate themselves on money or being coached. They make it complicated — but it’s simple. And I know you can make it simple. But, you need to have a system set in place first.
3.) Focus on growing yourself and your career
Our biggest asset throughout life — is time. Without being healthy and having a sharp mind, we can’t function. Focus on your health, focus on working out, your diet, etc. What you put your attention to will grow, and grow exponentially.
One’s career can shift many times throughout life. And that’s totally okay — and should happen. Whatever job you have — get good at it. Get really good at it. If there isn’t any room for you to do more at your current company and position — then leave. Life is too short to waste your time at a company that is not utilizing you and your talents. The best time to grow your career and look for a new job is when you have a job. Especially now — we see many people including myself have a lot of time on their hands. Don’t waste it.
4.) Invest, invest, and invest some more
I can’t stress this enough. Your money should be in the market, real estate, or businesses. If you have your money just sitting in a savings/checking account — then you’re falling behind. There’s nothing wrong with having 6–12 months worth of cash in an emergency fund. A savings account that is earning interest. I completely agree with that. But, after that — invest your money. Buy rentals, invest in the market, put your money into a business that cash flows nicely, etc. I’m a big believer in not putting your eggs in one basket — so invest wisely. Know your asset allocation.
The earlier you start investing in life, the more time you’ll have down the road. As mentioned earlier, our biggest asset is time. Money buys us time. It’s a tool that’s used to get us to where we want to go. Once you start investing early in life you really get to see the impact of compound interest down the road. It’s quite extraordinary.
5.) Establish GOALS for yourself
Have goals. What’s the point of all this? Why are you saving and investing your money. Do you plan to retire at age 40? Do you want to move to Costa Rica with your significant other for a few years after you have kids. Define your goals. Set a goal — and then figure out what it’s going to take to get there.
I see too many people saving and investing and not enjoying their life. It’s one thing to buy something you don’t need or enjoy. But, never forget to spend money on the things that make you and your family happy. Make memories. I definitely want to leave my heirs money, but I also don’t want to be the richest person in the cemetery. You can’t spend money when you’re dead — at least I don’t think so.
Final thoughts
I’ve realized over the years that growing your net worth comes down to one thing. What type of system do you have set up for yourself. Focus on that, and then everything just gets automated and becomes habitual. I look forward to moving money around every two weeks when I get paid.
Have goals. What makes you happy? How do you want to use your money now, and also in the future? What does your life look like ten, twenty, thirty years down the road. It’s hard to think of because life changes. But, when there’s a money cushion, it might make it just a little bit easier to make a decision. That’s up for you to decide..