Rev up your financial engines babe, because it’s that time of the year when resolutions are made, and we’re diving headfirst into the world of cold, hard cash. Grab yourself a pen and paper and brace yourself, we’re going to dive into taking control of your money and building your Net Worth like a BOSS!
You can calculate your Net Worth in 3 easy peasy lemon squeezy steps. However, I’m going to break it down even more for you, because knowledge baby! Understanding is key when learning something new, sure I could just give you the steps, but we’re humans, are we going to do it if we don’t really understand it?
WHAT IS A NET WORTH, YOU ASK?
Alright, so I’m sure by now you’ve heard the term “Net Worth” thrown around, but what does it really mean? Imagine there’s a tug-of-war between what you own (assets) and what you owe (liabilities). Your Net Worth is the result of that epic battle. It’s a snapshot of your financial health.
WHY SHOULD YOU EVEN CARE?
Now, you might be wondering, why should I even care about my Net Worth? Well, my friend, that’s because it’s your backstage pass to financial insight. It shows you where you stand financially and guides you on your money journey. Like your own personal GPS for navigating the treacherous terrain of your financial goals. Without knowing your Net Worth, it’s hard to see the progress you’re making, hard to capture the issues as they arise, you’re basically flying blindfolded through your financial maze.
WHAT DO I NEED TO DO TO WORK OUT MY NET WORTH?
So, how do you actually calculate this magic number? It’s waaaaay easier than you think.
List Your Assets
Here you’re going to write down everything you OWN. Property, Cars, Bikes, Boats, Caravans, Trailers, Cash/Savings, Shares/Investments, House Contents – if you can sell it for cold hard cash or it is cold hard cash, it’s an asset.
Yes, you can include Superannuation – However, in the beginning of my financial journey I calculated my Net Worth with AND without it. The reason being is because your superannuation is a lot harder to get access to. In an ‘emergency’ situation, you’ll have to count super out. Including superannuation gives you the overall picture, however, if shit hit the fan, you also want to know that you ‘own’ enough to make it out without debt.
NOTE: Assets which have a debt attached to it – in this step, I want you to forget about the debt for a moment. For example, if you own your family home, but it has a mortgage attached to it, I want you to pretend the home was completely paid off, no more mortgage – what would the house be worth in today’s market? This is the number you write in the assets column. Do this for all your assets which have a debt attached to it. We’ll sort the debt side in the next step.
Now, that last sentence is an important reminder – we’re looking at today’s market value. What you could sell your assets for today will be different to what you could sell them for in 6-12 months time. So be realistic with the numbers you’re writing down.
List your Liabilities
Time to face the dark side – Your liabilities! Your Liabilities are anything you OWE money to. This includes mortgages, car/personal loans, credit cards, buy now pay later accounts (afterpay, zip pay, zip money etc), interest free accounts and money owed to friends and family.
Going back the assets with liabilities – this is the step where we’re no longer pretending we’re mortgage/debt free, in this step list ALL the debt you have here.
CALCULATE YOUR NET WORTH
It’s the moment of truth. Add up your Net Worth by following this formula:
ASSETS – LIABILITIES = NET WORTH.
By subtracting your liabilities from your assets, you’ll have your current Net Worth! Pretty cool right?!
UNDERSTANDING THE RESULTS
Positive Net Worth? Negative Net Worth? What does it all mean to you?
POSITIVE:
If your Net Worth is a positive number, congratulations! You’ve got more assets than liabilities. This means if you sold everything you OWNED and paid off ALL your debts, you would still have money left over to start again.
NEGATIVE:
If your Net Worth is a negative number, no need to stress. This means if you sold everything you OWNED and paid off ALL your debts, you would have no money left and still have debt to pay off. This isn’t the end of the world or mean anything about YOU. This means ou now have a starting point for improvement and a baseline to base your progress on.
GOALS, BABY, GOALS!
Now that you know your Net Worth, it’s time to set some goals.Whether you’re in the green or the red, there’s always room for improvement and goals to be achieved!
If you have a negative Net Worth – maybe you can aim for a break even Net Worth.
If you have a positive Net Worth – Set your sights on the next financial milestone! Working towards the next 10k or 100k.. For example, you have a Net Worth of $81,000, you could make your goal $90k or $100k.
Small goals lead to BIG victories, so start with smaller, more frequent milestones and celebrate reaching your goals every time you reach them!
STRATEGIES FOR NET WORTH GROWTH
Alright, let’s talk about how to pump up that Net Worth. Earning, saving, and slaying debt are the holy trio of Net Worth growth.
Find ways to increase your income, cut back on expenses, save and tackle your debt head on.
TRACKING YOUR PROGRESS
Now that you’re on the path to financial abundance, it’s important to keep track of the progress you’re making. Each month take a money minute to check in on your Net Worth. This not only helps you to stay motivated but also allows you to catch any issues or change in your situation quickly. Checking in on your Net Worth is as simple as working out your Net Worth again and comparing it to last month.
CELEBRATING YOUR WINS
Finally, don’t forget to celebrate your milestones along the way. Everytime you reach a new milestone or achieve something new, no matter how small, take a moment to pat yourself on the back. Everytime you celebrate your wins it releases the dopamine needed to keep going! Remember financial success is a journey, not a destination, so enjoy the ride and celebrate every step of the way.
CONCLUSION
So, there you have it – a comprehensive guide to understanding and improving your Net Worth in just 5 minutes. By taking control of your finances and setting little goals along the way, you can build a brighter future for yourself.
It’s never too late to start, so why not start today? If you weren’t following along from the beginning scroll back up to the top and follow along with the steps.
Have you started your Net Worth yet? What is your goal for this year?