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.

What You Need to Know About Your Credit Score

Got a great idea or suggestion of what you would like us to blog about? Please send your inquiries to stashadvisor@gmail.com or comment below. 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.

7 Expenses That Destroy Your Wealth If You Aren’t Ready

When you’re in your twenties, there are many things that take getting used to. You start taking on many new responsibilities, and often times there are things you don’t think about,  but that doesn’t stop them from coming. One of the many things that happen are expenses that people don’t think about until they are about to undertake them. We decided to make things a little easier for you by compiling a list of 7 expenses to start considering.

Retirement

Retirement may seem like an event that is far away and may not be something that you consistently think about. However, the earlier you start planning for it, the better the chances you will have of supporting yourself when you eventually find yourself in the process of retiring. In 2013, the average age for men to retire was 63.9 and the average age for women was 61.9 (4). This means that if you are 22 you have about 40 years to save and invest before you retire. There are a few ways that you can prepare yourself. The first step is knowing how much you need for retirement. This amount varies from person to person so it’s important to do your research. After figuring how much it takes for you to retire, you need to figure out what to invest in. Examples of tools for retirement include 401ks, and Traditional or Roth IRAs. Finally, after figuring out how much you need to invest, and figuring out where you are going to invest it, you need to find out how much you are going to invest each month to get to your goals.

Insurance

You’ve probably already started paying for some form of insurance whether it be car, life, health, or home. However, it is still something to be aware of especially since it takes a percentage of your paychecks. The key to insurance is finding the right policy that works for you.

Higher Education

For those of you who are looking to get another degree, the cost of graduate school is another thing you should think about when planning your future finances. Depending on what degree you plan on getting, tuition varies widely. Of course it’s possible to get scholarships, or have your job pay for schooling but having a plan before you start applying will put you in a better position to know what you will need to do to pay for your degree.

Wedding/Honeymoon

The bottom line is that weddings and honeymoons are expensive. The average cost of a wedding is $26,444 (1) and the average honeymoon is about $5000 (2) with such a high price, and for an event for most that is generally inevitable, it’s smart to start thinking about how you are going to pay for it. It’s also a good idea to keep in mind that in 2013 the average age for marriage for women was 27, and 29 for men (5), so the earlier these costs are on your radar the better.

House/Mortgage

Buying a house is a major milestone in your life. There are two ways to pay for it. Either with cash up front or with a mortgage. A mortgage is a loan that is lent to a potential home owner so they can finance the purchase of their house. The national average for a mortgage is “$222,261 with a $1,061 average monthly payment for a 30-year mortgage at 4 percent, according to LendingTree” (3). According to Zillow, The average age of a first-time homebuyer is about 33 (5).

Babies

Babies may not be at the forefront of your mind, however they certainly are something to consider financially. According to parenting.com a 2010 USDA report, the average middle-income family will spend roughly $12,000 on child-related expenses in their baby’s first year of life, and that is just the beginning. You still have to account for the cost of taking care of your child for at least 18 years. You are looking at spending over $200,000 over 18 years.

Your Children’s College

The average annual cost of public universities is $30,000, while private universities are $40,000 which is something to consider if you plan to pay for your child’s schooling. For college alone that is a range of $120,000 to $160,000.

The future can be overwhelming, and often we are told by those who came before us that they had wished they had prepared for certain events better. If you know what is coming, you will have a much better opportunity to prepare for these events, and meeting them successfully. We have provided this list so you are sufficiently prepared for the events that will inevitably come your way. Hopefully this will help you prepare as you navigate through your life.

Did we miss any major expenses? Let us know in the comments sections below. Got a great idea or suggestion of what you would like us to blog about? Please send your inquiries to stashadvisor@gmail.com. or comment below 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.

Sources:

1 Average Wedding Cost in the United States is $26,444. http://www.costofwedding.com/

2 How to save on a Caribbean honeymoon http://experience.usatoday.com/beach/story/caribbean/2014/06/04/caribbean-value-honeymoon/9970857/

3Realtor Magazine. http://realtormag.realtor.org/daily-news/2012/01/03/what-does-average-home-owner-pay-mortgage

4The Huffington Post. Kelsey Borresen –http://www.huffingtonpost.com/2013/11/14/married-young_n_4227924.html

5 Zillow: Average First-Time Homebuyer 33 Years of Age https://www.linkedin.com/pulse/zillow-average-first-time-homebuyer-33-years-age-carlos-m-moreno