If you want to increase your Net Worth, you should first calculate it. Calculating your Net Worth is Step 1 in my Net Worth Millionaire Plan.
When I was in my early 20s, I thought I had a good understanding of my financial worth. However, only when I officially wrote it down on paper did I truly realize where I stood. One can either be on a path to becoming wealthy or living day-to-day. Hence, the reason that I began this blog.
I developed a simple Net Worth Analysis form. First of all, the information laid out in this analysis will assist you in understanding your assets (what you own) and your liabilities (debts-what you owe). In providing a clear picture of your financial health, you will see where you are winning and losing in regards to increasing your worth.
WHAT IS A NET WORTH?
Your Net Worth is your assets minus your liabilities.
Some examples of assets (what you own) are as follows:
- Money in your checking, saving or money market accounts
- Value of your investments – CD’s, mutual funds, stocks, bonds, etc.
- Value/Equity in your home
- Value of your Retirement accounts – 403(b), Roth IRA, IRA, Roth 401(k), 401(k), SEP-IRA
- Value of collector items – stamps, cars, art, etc.
Some liabilities (what you owe) include the following:
- Credit card(s) – the amount you owe (personal, store, etc.)
- Mortgage(s) – remaining loan balance (personal/rental)
- Loans – all borrowed money (car, business, personal, payday, school)
- Back taxes to the IRS
For example, if the value of your assets are $50,000 and your liabilities (debts) are $25,000 you have a Net Worth of $25,000 ($50,000-$25,000). I recommend reading The Average Net Worth For The Above Average Person written by another financial blogger named Financial Samurai for additional information.
ADDITIONAL NET WORTH INFORMATION
My Net Worth Analysis completely changed my financial perspective. I realized that every $1, $100 or $1,000 I put into my emergency fund, 401k, college fund and house fund would increase my assets. I needed to find a way to work through each step to put my wife and I on the path to becoming Net Worth Millionaires. As a result, I became intentional and automatic with every dollar I earned, invested and spent. Furthermore, I wanted to become a Millionaire so before I spent another penny I would ask myself the following questions:
- Is this purchase a need (food, gas, electricity) or a want (coffee, tools, new cell phone)?
- Will this purchase increase my assets?
- Will this purchase increase/decrease my liabilities?
- By spending this money, will it add value to my life (traveling to see family/dinner with friends)?
- Is the amount I am going to spend worth the time I worked to earn it and will it help achieve my financial goals?
Consider the questions above when deciding how to spend your hard-earned money and how it will affect your financial future. Therefore, make good day-to-day decisions so that you are putting yourself in a position to win. Also, winning, in spite of all the tough financial challenges you come across, will feel better.
In addition to the analysis, make sure to add your realistic goals for 1 month, 3 months, 6 months and 1 year. After one year, I recommend calculating your worth every 3 months rather than each month. This will become especially relevant when you see your assets increasing and your liabilities (debts) decreasing.
YOUR ACTION STEPS
Your action steps to financial success are as follows;
1-Click on and Complete the Net Worth Analysis link
2-Develop and Create your actual Net Worth and future goals
3-Make decisions that will increase your assets and decrease your liabilities
In summary, understanding your current financial situation and following my steps will put you on a path to increasing your Net Worth and peace of mind.
Print: Net Worth Millionaire Plan
