Steps to Track Your Net Worth - Money Tip Tuesday

Have you ever heard people talking about net worth and wondered what it means? Well, today, you are going to learn!   

Links:

• Watch our Financial Freedom Webinar to learn how to strategize and build a debt payoff plan
• Learn how to set savings goals with Goal Builder 
• Check out TCU University for financial education tips and resources!
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• Learn more about Triangle Credit Union 

Transcript:

Welcome to Money Tip Tuesday from the Making Money Personal podcast. 

Net worth! What is it? Why is it important to track? How do you find out what your financial net worth is? All valid questions, my friends. First, let's define what net worth is.  

The dictionary defines net worth as "the total wealth of an individual, company, or household, taking account of all financial assets and liabilities."   

Most people will agree that the definition of net worth is simply: assets - liabilities = net worth.    

Now that we know what it is, why is it essential to track it?   

Well, it allows you to see your financial situation at any point and whether your wealth is increasing or decreasing. Tracking your net worth is important because it gives you a clear picture of your financial health and can help you make informed decisions about your money. Please know that it is very possible to have a negative net worth. This means that you owe more money than what your assets are worth. We'll talk a little more about this later.    

Now, let's take a look at how you can figure yours out. Are you ready? Ok... take out a piece of paper and a pen or pencil. Draw a line straight down the middle.    

On one side, you are going to write the word assets, and on the other, write the word liabilities.    

On the assets side, make a list of valuable items that you own… think bank accounts, investment accounts like 401(k)s, any real estate property that you may own, personal property such as cars, or other items that have value. Next to these items, write down their approximate value. Here is an example of what this may look like (we'll use easy round numbers for simple math):    

Bank Accounts - $5,000    

Personal Home - $300,000   

401(K) - $50,000   

Car - $20,000   

At the bottom, you will write the total for all assets. In this example, we will have a total of $375,000. Nice!   

On the liabilities side of your sheet, make a list of your liabilities. Liabilities are the debts that you may owe. Next to them, write the balance so again, for easy math, in this example, we will do   

Mortgage -  $210,000   

Credit Card Debt - $5,000   

Auto Loan - $10,000   

Student Loans - $50,000   

 

And that Home Equity Line of Credit you took out to fix up your house - $40,000   

At the bottom, you will write the total for all liabilities. In this example, we have $315,000. Ouch!   

Now, we have the numbers we need to calculate net worth. Remember, net worth equals assets minus liabilities.    

In my example, the assets total $375,000, while the liabilities amount to $315,000, resulting in a total net worth of $60,000. Not too shabby.    

Let's say you calculated yours, and you didn't like what you got. You got a negative number. This means that your debts exceed the value of your assets. Let's flip my example and say you have a negative $60,000.    

Do not get discouraged. Many families and individuals are right there with you. According to MarketWatch, one in five Americans has a zero or negative net worth.

You're not alone in this journey. Instead of dwelling on it, get motivated to get that number into the positive. You got this!   

Here are a couple quick tips on how to improve your net worth: 

• Work to pay down existing debts. Focus on developing a method to really pay down debt. Read a book, attend a seminar, or watch one of our debt reduction webinar recordings on YouTube to learn all about the process of taking control of and tackling debt. Check the link in the show notes to watch.  

• Avoid taking on any new debt. Put those credit cards away and try paying cash or use a debit card more. Even if only for a short time, this method can effectively help you avoid adding onto that growing debt pile and keeps you more conscious of spending habits. 

• Adjust your budget to emphasize saving. Every saving opportunity can boost your net worth. Explore opportunities to increase savings like boosting retirement contributions, and opening a new account for emergencies or other long-term goals. 

For Triangle members listening to this episode, we actually have a lot of cool tools available within our online and mobile banking platform to help you track net worth, pay down debt and set savings goals.  

Check out Money Management within online and mobile banking to track your net worth as it grows, set budgets and even debt payoff goals.  

We also have a tool called Goal Builder that helps you set up and track savings goals within your Triangle savings accounts. This is great if you’re looking for an easy way to save more for emergencies, a new car, a house downpayment or any other long or short term goal.  

Alright, that's going to do it! I hope you learned something new today, and we've given you the motivation to look into your net worth and grow your wealth! Remember, it's never too late to start building your financial future.   

If there are any other tips or topics you would like us to cover, let us know at tcupodcast@trianglecu.org. Like and follow our Making Money Personal FB and IG page and look for our sponsor, Triangle Credit Union on social media to share your thoughts.   

Thanks for listening to today’s Money Tip Tuesday and check out our other tips and episodes on the Making Money Personal podcast.   

Have a great day!