What’s Your Net Worth?

Have you ever Googled a famous person to find out their net worth? I know I have. Do you know what it means? Do you know how it’s calculated? Most importantly do you know that you have one? In this week’s post, we are going to go over the basics of what a net worth is and why you should pay attention to it.

What’s a Net Worth?

A net worth is essentially the sum of your assets subtract your liabilities. Assets being the things you own such as cars, cash, homes, investments, anything of substantial value. Then liabilities being the thing you owe to others,this can include credit card debt, your mortgage, student loans,etc.

How to Calculate Your Net Worth

Calculating your net worth is an easy process. All you have to do is add up all the assets you possess, then subtract  the total sum of assets from your liabilities to get the final amount. For instance, imagine you own a house that’s worth $100,000. And a car that’s worth $40,000. Now imagine  you have $30,000 dollars worth of student loans. To calculate your net worth you add the house and car amount together to get your total assets which is $140,000 and subtract the student loans debt of $30,000 which would make your net worth $110,000. Based on the results you may find that you have a positive net worth if you have little debt, and  a negative net worth if you have a lot of debt. So, why is this important?

The Importance of Net Worth

It’s good to check your net worth from time to time because it will let you know if you’re on track to achieving your financial goals. Think of checking your net worth like checking how much you weigh. When you check out how much you weigh you have an accurate idea of if your workout and diet plans are effective. likewise checking your net worth will let you know if you will have an effective financial plan and strategy for investments, savings, and retirement.

Increasing Your Net Worth

The simplest way to increase your net worth over time is to diminish your debt and increase your assets. There are many ways to do this. Methods include paying off your debts, reducing your spending, and increasing your savings, investments, or income. However, whichever strategy you use, make sure you stick to it and stay consistent.

Net worths are not just for the rich. Although it’s a simple calculation. It’s an invaluable tool to check in with yourself to see how you are doing financially.  It will allow you to see if your strategy for accumulating wealth is working or if you need to reassess your financial plans. And who knows, if you check in with your net worth long enough and tweak your strategy, you may eventually find yourself among the very rich.

Is there another personal financial topic you would like to learn more about? Comment below or send your inquiries to stashadvisor@gmail.com. We are all about bringing you the most value!

This blog post is provided for discussion purposes, and is not intended as professional financial advice. It’s intent is not to be used as the sole basis for your investment or tax planning decisions. To get more information please speak with a financial planner. Under no circumstances does this information represent a recommendation to buy or sell securities.

Accomplishing Your Financial Goals

No matter what stage of life you’re in, you should have financial goals. Your financial goals may be simple or complex, short or long term, small or big. Some more common financial goals are saving money for retirement, purchasing a house, traveling, or paying down debt. So, how do you accomplish these financial goals?

Think of the goal you would like to accomplish and when you would like to accomplish it. Keep in mind many financial goals align with personal goals. Do you want to retire with a certain amount of money, do you want to pay down your debt by a certain date, do you want a car, do you want to travel? Then, consider how much money you need to accomplish your  goal and when you would like to accomplish it. You can discover this number by some simple research on what your goal is.

Once you have a list of your goals, their estimated cost, and when you would like to accomplish them by, you need to prioritize them by their importance to you. When setting financial goals I find it easier to work backwards. Look at the goal at the top of your list and it’s deadline, calculate the number of months between today and your deadline date, this number will tell you how many months you have to save money. Divide the total estimated budget, of your goal, by the number of months till its deadline and you will then have the amount of money you need to save each month.

For instance, I set a personal goal of traveling once a year because it is something I greatly enjoy and it’s something I want in my life. This translated into a short term financial goal of saving $1,500 for my first trip. I estimated this should cover airfare, accommodations, food, transit, etc. Keep in mind, some financial goals take more research than others. I wanted to take my trip in one year, providing me with 12 months to save. To figure out my monthly savings amount I did the simple math of 1500/12=125. I needed to save $125 per month to take my dream trip. My next step was to review my budget and figure out where the $125 per month would come from.

When you really look at your budget, once you have been tracking it for a couple months, you will be surprised to learn where some of your money is going. For instance, how I started saving for my trip was by not purchasing as many coffees per week. I set a small financial goal of only purchasing 2 coffees per week. Setting a small goal of only purchasing 2 coffees a week when I was previously purchasing 4, saved me $10 per week, that is $40 per month, and $480 per year. Yes, this may not be all of the money I needed each month for my travel goal but it brought down my needed amount to $85 rather than $125. Think about where you can compromise, whether it be eating out, entertainment, drinks out, or cab rides, you will be surprise when you break things down by category and learn how much you are spending. Upon further review of my budget I had a little more than $85 per month in my budget not being spent, which gave me my needed total of $125. After reviewing your budget you may not need to compromise on anything.

Keep in mind with some larger long term goals, such as retirement, you should also consider the interest gained in the accounts you deposit your funds into. You can use an estimate of the interest gained to learn how much money you will have by the end of your set deadline. Financial goals should not be overwhelming. The key is to break financial goals down into achievable steps and small goals. Once you break them down they are much more easily achieved.

 

Got a great idea or suggestion of what you would like us to blog about? Please send your inquiries to stashadvisor@gmail.com. We are all about bringing you the most value!

This blog post is provided for discussion purposes, and is not intended as professional financial advice. It’s intent is not to be used as the sole basis for your investment or tax planning decisions. To get more information please speak with a financial planner. Under no circumstances does this information represent a recommendation to buy or sell securities.

 

5 Ways to Eliminate Your Debt

Create a Budget

Creating a budget may seem obvious but it’s an important step to paying down your debt and a good place to start. Make sure to create a realistic budget that allows you to pay down your debt but also allows you to have some spending money. Cutting all extras out of your life is unrealistic and will just cause disappointment when you eventually break your budget.

Check Interest Rates

If you have multiple debts you are attempting to pay off check the interest rates. Make sure to make minimum payments, or a little bit more if you can, on all of them and then put any additional funds towards the debt with the highest interest. This will save you money in the long run.

Pay More Than the Minimum

When it comes to paying down debt you always want to try and pay off more than the minimum payment, so you actually are making a dent in your debt. In most situations your minimum payment will only cover the interest that has been gained on the debt if that. So, if you actually want to see your debt go down you need to start paying more than the minimum.  

Think About Your Habits

Considering your spending habits is important to successful financial management. In doing this you will understand where you struggle to control your budget and also where you succeed. This will help you determine where you need to exercise a little more control to meet your goals of paying down your debt.

Automate Payments

Try and set up automatic payments for the debts you are paying off. This is beneficial for two reasons. First it will not allow you to miss making a payment and second, the money will not unintentionally be spent on other costs. You can also consider setting the payment date for the same day you normally get paid, this way it will seem similar to automatic deductions of your paycheck such as health insurance and retirement deductions.

What to do Next

Your next step is actually creating a debt repayment plan, which can get a little bit confusing, overwhelming, and frustrating. The goal normally with paying down debt is to get rid of it as fast as possible or faster than what is planned. For instance when considering federal college loans you are looking at a time frame of 10-30 years. Most of us want to get that debt gone in 10 years or less. To figure out your debt repayment plan look for debt repayment tools like Ready for Zero.

Ready for Zero is a free app and website that allows you to either link your debt accounts (credit cards, loans, etc.) or enter them in manual so there is no linking to your accounts and helps you create a repayment plan. Once you have entered your information you can change the date you want to be debt free by, or the monthly payment amount and the program will show you what your monthly payments need to be to achieve that. They also have some other great resources that will help you manage your debt. However, there are many other resources out there to help manage debt, find out which one is best for you. Share with us any tools and tips you have found useful!

 

Got a great idea or suggestion of what you would like us to blog about? Please send your inquiries to stashadvisor@gmail.com. We are all about bringing you the most value!