Will you give it all away, too?
Understanding and improving your net worth is a vital part of financial health.
Your net worth number is the total amount left after you subtract your total amount of liabilities from your total assets. It shows where you stand and what needs improvement from a financial perspective – and it’s a great starting point for setting goals and making a plan.
Let’s consider this scenario:
Meet James. He works hard and looks forward to the weekend, but by Monday, his paycheck is often almost gone after rounds of Starbucks, shopping, dates, and dinners.
James is giving his money away, and he isn’t reaching his goals.
Sound familiar? This pattern of living paycheck to paycheck, trapped in debt, hinders wealth-building. The key is to give every dollar a job to help identify and cut unnecessary expenses. Say goodbye to that unused gym membership or the streaming service you forgot you had.
James can turn it around, though. You can too, if you have the same habits.
If your goal is to get out of the paycheck-to-paycheck cycle and build your net worth so you can retire comfortably, here is a quick roadmap you can use.
- Emergency Fund: Save $1,000 as quickly as possible to prevent falling further into debt during unforeseen circumstances.
- Debt Snowball: List all your debts, excluding your mortgage, from smallest to largest. Aggressively pay off each one, starting with the smallest.
- Fully Loaded Emergency Fund: Once you’re debt-free, calculate 3-6 months of expenses and save that amount (you’ll have extra to work with now that those creditors aren’t dragging you down.
- Retirement Savings: Invest 15% of your income into retirement accounts like a 401(k). Consistent contributions are the key to long-term wealth growth.
Now that you’ve got a great foundation built, you can build your net worth even more with the next steps.
- For The Kids: Consider setting up a 529 plan or ESA for your children’s education. These savings are valuable assets for your family and give your children a huge advantage when they go out into the world.
- Mortgage Payoff: Imagine a life without a mortgage! Accelerating your mortgage payments can help massively elevate your net worth.
- Wealth Giving: Debt-free and with a solid net worth, you’re now in a position to live generously and continue building even more wealth.
Remember, this is just one possible way to build wealth…
… the best way to do it is to create a plan that’s got you written all over it. To get help with that, get a pro on your side and work with a financial advisor.
Together, we can craft your optimal plan and implement it!
If you’re ready to revolutionize your financial life, book a 15-minute consultation and chat about your plan (where you are now, and where you want to be in the future), it’s easy – just click the buttons below.
