Net Worth Explained – How to Get Rich (Part 3)

Nov 22

Written By Eric Gelb

Welcome back.

Check out Part 1 and Part 2 of this series about building net worth and accumulating wealth.

This week, you’ll learn how to calculate your net worth and how to increase your net worth.

The net worth formula:

Make a list of all your assets at their fair market value. Deduct the disposal costs and taxes you estimate you would have to pay on any gains.
Make a list of all your liabilities at their fair market value. Factor in any disposal costs and taxes you might have to pay.

Calculate your net worth which equals the value (after disposal costs and after taxes) of your assets minus the fair market value (after-tax) of your liabilities.

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9 Ways to Boost Your Net Worth

Increase Your income But Don’t increase your spending or your expenses. Keep your spending and expenses in check.
Reduce your expenses and direct more money to savings and investments.
Reduce your discretionary spending to free up cash and direct more money to savings and investments.
Increase your income BUT do Not up your lifestyle. Do Not increase your spending or expenses. Instead, direct more money to savings and investments.
Increase your savings. For example, build an emergency fund. Research market interest rates and interest-bearing instruments, for example money market accounts; US Treasury Bills (T-Bills); Certificates of Deposit (CDs); and other similar instruments.
Invest in growth assets. Examples potentially include common stocks and real estate.
Increase the value of your assets. A prime example of this is if you own a business and can grow revenues and profits.
Pay down your debt and reduce your other liabilities. Especially high cost debt, including especially credit card debt.
Pay down the mortgage on your house.

Be sure to meet with your financial planner and evaluate among other things your financial goals; risk tolerance; investment time horizon (timeframe); and asset allocation

Next Steps

Your net worth is one of the most important numbers in your financial life. It provides a clear picture of where you stand financially and can help you achieve your financial goals and measure your progress (track your progress) against your financial goals – how much more wood you have to chop in order to achieve your financial goals.

In short, your net worth is one of the most important keys to building wealth.

By getting a good handle on your finances, your spending and your income and taking smart steps to grow your assets and reduce your debts and other liabilities, you can increase your net worth, build more wealth, gain peace of mind, achieve financial freedom and enjoy the life you desire.

Along the way, celebrate your progress. Focus on the happiness you’ll get from the outcome of your efforts – the results of your financial planning, money saving and wealth-building actions.

See you next week when we’ll cover a few more practical ways to grow your net worth. In the meantime. . .

To Boost Your Net Worth, click here.

Arthur V.

Disclaimer: OH and Please Remember, we are Not financial advisors, financial planners, attorneys or accountants and are Not providing any specific financial, tax or legal advice here. Be sure to conduct your own due diligence and consult your own professional advisors to get sound professional advice that’s specific to your financial and personal circumstances, risk tolerance, time horizon and investment goals and objectives among other key factors!