Good morning Dinks. As you know I’ve had my share of financial troubles in the past. I have been dirt broke and over $50k in debt. Now I’m happy to say that for the first time in my life (in my 30s) I have a positive net worth.
I know this isn’t really a big accomplishment because I should have had it a long time ago, but I am very proud of it because having a positive net worth means I’ve finally arrived – financially. I keep seeing financial bloggers write about their million dollars of assets and millionaire net worth’s ad I’ve just never had that. But now I do and this is how I did it.
Pay Off Debt
Your net worth is the total value of your assets minus your debts. You can grow your net worth in two ways, by paying off your debts or growing your savings. If you have $15k in savings but $20k in debt you actually have a negative net worth – I lived in this zone for many years. If you have no debt and no savings then you don’t have a net worth at all – that’s where I was.
Now I’ve taken the necessary steps to pay off my debt and in turn my net worth has grown by $30,000 within one year. How amazing is that?!
Invest For The Long Term
I know $30k may seem like a lot to some and it may seem like peanuts for others, but it’s a big accomplishment for a girl who has lived most of her adult life in the red. Investing for the long term is one of the best ways to help grow your net worth. Of course it isn’t enough on its own, but it can help grow your money a lot quicker than holding it in cash.
I put both my annual performance bonus as well as my tax refund into my retirement account and now I can just sit back and watch it grow.
Save Money. Really Save It.
Not spending money isn’t the same as saving money. Saving money means you don’t spend it and keep it forever and ever. So often people think saving money is just not spending money on one thing and then end up spending it on something else. But that doesn’t help grow your net worth. As long as your accounts stay in a positive balance that exceeds your total debts you will always have a positive net worth.
Diversify Your Assets
Saving your own money will help grow your net worth but taking advantage of other plans like employer benefits and government programs will also help your savings grow. Diversifying your money to make sure you don’t put all your eggs in one basket is another effective way to watch your bottom line increase.
Buying mutual funds and ETFs across different sectors such as fixed income, equities, domestic as well as foreign investments ensures you have a little bit of everything. The same can be said for real estate. I have clients who choose to diversify their real estate holdings between residential and commercial, but also geographically.
What’s the best way to increase your net worth?
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Dinks,
Great article. I know I have things that I wish I did not waste money on, or saved money only to waste it on something else. Actually saving money without planning on spending it takes some willpower. Great job with sticking to your plan.
Great Article,
DividendMonkey
I think you’re missing a major component to your net worth calculation…your home. The assessed value of your home should be considered an asset, while any money you owe on your home goes in the debt/liability section.