In order to get where you want to go, you need to know where you are now. Understanding your net worth is of crucial importance when it comes to personal finance. You can make your own personal net worth statement by using our calculator to determine the difference between what you own (assets) vs. what you owe (debt). You can also estimate what your net worth could be in the future based on specified growth rates.
What is the Value of a Net Worth Statement?
Calculating your personal net worth is one of the best ways to determine if you are on track to meet your financial goals. You may have a desire to become debt free within a certain time frame or to retire at a specific age. It is difficult to make those goals happen without understanding how all the numbers come together to make up a financial picture of where you are now.
Having a positive net worth or a negative net worth today, isn’t nearly as important as where you are headed in the future. It is common for young earners to be in the red with their net worth if they are saddled with student loan debt and/or have purchased their first home with a mortgage attached. Remember, that your income is only likely to grow from here on out. Use this to your advantage by finding ways to decrease debt quickly while you enjoy steady growth in your income.
How Do I Increase My Net Worth?
If your net worth isn’t where you want it to be, the first and most important thing you can do to make that number change it is to make a solid financial plan. Since your net worth will automatically increase when you pay off debt (assuming you don’t take on new debt), make a plan to pay off that debt as quickly as possible. This will likely mean living on a written budget and cutting back on nonessential spending. Since your home mortgage is likely be your largest debt, paying your home off quickly can drastically increase your net worth – especially if your home value continues to rise.
Your net worth will also increase by saving money. The more your saved money grows the more your net worth becomes larger as well. Early investing will eventually increase your net worth even if it takes a while to see the growth with smart long-term investing.
Find ways to earn money. One way to get out of debt quickly and/or to save money is to pick up a side hustle. You may be surprised just how much of a dent you can make in your debt or add to your savings account with an extra paycheck each month. You can watch your net worth number change in a big way when you are willing to put in the elbow grease needed to make it happen.
How Often Should I Calculate my Net Worth?
Calculating your net worth often will keep you focused on your personal finance goals by helping you determine what debt needs to be paid off next or what growth you can expect from various assets. Using our net worth calculator helps you to visualize the progress you are making in your financial journey. Money Help Center has free and unbiased calculators for all your personal finance questions. After determining your net worth, be sure to calculate just how quickly you can become a millionaire.