Do you know your net worth and how to make the most of it?
Your net worth is essentially a dollar amount that shows the total value of your assets, minus your debts. Assets are things such as retirement savings accounts, your home, and valuable possessions like a vehicle or jewelry. Debts include things like mortgages and credit card balances. When you know your net worth, you have a great way to gauge your overall financial health.
The average net worth varies greatly based on your age. For example, the average net worth for a person who is 70 – 74 years old is $225,390, while the average net worth for someone under 35 is only $6,900. What a huge difference the years can make!
As you can see, your net worth typically increases with age. But you can also do some things right now to improve your net worth. Check out these 10 ways.
1. DEVELOP A NET WORTH MENTALITY
If you want to improve your net worth, then a mentality shift may be in order. You may need to reexamine your everyday financial choices depending on where you are today, and that isn’t always easy.
For example, you may need to embrace frugality, forgo little luxuries, or put off a purchase or vacation because you would have to use credit to make it happen. Your net worth can only grow if you increase your assets and reduce your liabilities, and that may require sacrifice. Without a net worth mentality, making these hard choices might be impossible, so you need to adopt a mindset that prioritizes building your net worth if you are going to succeed.
2. TRACK YOUR NET WORTH
You can’t monitor your net worth if you don’t know what it is today. While you can certainly do the math yourself, this isn’t always convenient, especially if you have a lot of accounts. Luckily, there is a better way.
Tracking your net worth with Personal Capital is an easy way to get started. You gain access to a wealth of helpful tools that can make taking control of your financial life simpler than ever before.
3. MONITOR YOUR CREDIT
Both your credit score and report are critical components of your financial life. They determine your eligibility for a range of financial products as well as the interest rate you’ll end up paying.
When you monitor your credit, you empower yourself to make smarter decisions about money and debt. If you want to monitor your credit for free, then Credit Sesame is a great option. Not only can you see your score every month, but you also get personalized recommendations designed to improve your financial situation.
4. ADD INCOME STREAMS
When you add new streams, you not only diversify your income but also create opportunities to build new skills and potentially reach greater levels of professional success.
Choosing a side hustle that offers you flexibility and income-generating potential, like starting a blog through Bluehost, can be the key to bring in extra money and even providing yourself with more financial security. Whether you decide to save, invest, or use the cash to pay down debt depends on your goals, but every dollar can make a difference when you want to improve your net worth.
5. BUILD AN EMERGENCY FUND
An emergency fund provides you with a financial buffer against the unexpected. Whether it’s a surprise medical bill, car trouble, or an appliance failure, you don’t have to resort to adding new debt to handle the situation.
If you build your emergency fund with Radius Bank’s Hybrid Checking, you make sure your money is always working for you thanks to the generous interest rate. That way, your emergency fund grows over time instead of just sitting there stagnant.
6. PAY DOWN HIGH-INTEREST DEBT
Since debt is a financial liability, it harms your net worth. By focusing on paying down your high-interest obligations first, you not only improve your net worth but potentially save yourself a ton in interest. Plus, the less money you have going out to pay down debt, the more you can save and invest, giving you another chance to secure your financial future.
7. OPTIMIZE YOUR 401(K)
A healthy retirement plan is at the core of your overall financial well-being. By optimizing your 401(k) with Blooom, you receive personalized reallocations that improve the performance of your account. And, when your retirement count is working to the max, it grows faster, allowing your net worth to rise right along with it.
8. START INVESTING
Investing can be a great way to bolster your net worth. Your money can usually grow faster than it would in traditional savings accounts, but its also more accessible than if you stash it away for retirement.
Today, there is a slew of easy-to-use apps to help you get started. Options like Acorns and Stash make micro-investing (investing by socking away small amounts – like spare change – frequently) a breeze, while Betterment, a leading robo-advisor app, allows you to take a “set it and forget it” approach to reaching your investment goals.
9. GO AFTER A RAISE
If you haven’t received a raise or promotion recently, then it may be time to ask for one. As long as your request is reasonable and aligns with salary norms in your field and location, there is little harm in asking.
Before you broach the topic, do a little research and come armed with evidence that showcases your value as an employee as well as what the average pay rate is for similar professionals in your city. This gives you the best chance of making a solid point, increasing the odds your employer will say yes.
Since your income plays a big role in your net worth, pursuing a raise when one is deserved is a smart move. After all, many companies aren’t going to increase your pay without a catalyst, so consider being the spark that leads to better things.
10. BUY PROPERTY INSURANCE
A natural disaster can wreak havoc on your financial life if you aren’t protected, so make sure you have the right amounts and kinds of insurance coverage for your home, personal property, and vehicles. While you send money out the door in premiums, it beats having to potentially pay for thousands of dollars in major repairs or replacements out of pocket, as well as legal bills in cases involving liability.
NET WORTH CONCLUSION
Ultimately, knowing how you stack up compared to the average net worth and striving to improve your each and every day, you position yourself to have the best financial future possible. Start using some or all of the tips above today, and see if your personal net worth doesn’t start heading in the right direction.
So, do you know your net worth? Or, in what ways have you worked to increase your net worth? Let us know in the comments!