It’s that time of year again when we can look back at the progress you made from last year, and realize you really are making progress month by month. What we are going to talk about is your net worth and how that is increasing. We are looking at three ways to update your net worth.
In the past, we have talked about how to calculate your net worth. This is simply, what you own, minus what you owe, and that equals your net worth.
So if you take everything you own and sell it off or pay it off, then all you owe, that gets us to what is your net worth. Let’s talk about a few ways that your net worth has increased over the past year if you are doing these basic things you have forgotten about.
How to update your net worth:
1. Debt: So the first thing you should be doing is pay down debt.
So this can be something like your monthly mortgage. So every month you are paying your mortgage. And that goes to pay down your principle, the amount you owe on your home, and then part of it goes towards interest. And so every time you are paying down your principle, this is increasing your net worth. You now own more of your home than you did before.
2. Saving Money: So another thing is actually saving money.
Whether you are putting money into your bank account or putting money into a 401k, whenever you are depositing money and saving that for a goal or for future use, you are actually increasing your net worth.
3. Investing: The last thing that happened this past year in a good way when the market was up, is investment growth.
So the money you are setting aside for future goals when you invest, and the market moves higher, and the types of investments that move higher because of that, you are getting that growth.
So all three of these things, if you were doing them last year, you are now seeing that difference. You are seeing a higher net worth because you were doing things little by little last year.
A lot of times if you are setting that to be automatically happening, month by month, we forget about it because it is happening automatically. So take the time to actually schedule a financial review, whether you are doing that yourself or you are going to sit down with you advisor, to be excited about all the progress you had last year that you may have even forgotten about. And now that you know how to update your net worth we can look forward to all the progress you are going to have this year!
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