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A woman who does not understand her own personal net worth and its full picture may not improve her financial position despite her bulldog determination to do so. In fact, you can’t go any further with your financial goals until you figure out how much you got in the first place.
What is a net worth?
It is your overall financial position-- the difference between what you own (assets) and what you owe (liabilities). Your home, cash value of your life insurance, stocks, bonds, savings accounts and emergency fund and everything you own with monetary value and convertible to cash are assets. On the other hand, all your debts, like the balance on your mortgage and credit cards and all monies that you owe are liabilities.
You have a positive net worth when your asset is higher than your liabilities. Some assets appreciate with time, such as retirement plan, real estate, jewelry and collector’s items. While others, lose their value through times, such as furniture, car and appliances. Since assets could appreciate and depreciate based on the economy, marketing tends and other factors, it is important to take a proactive role in accumulating assets and reducing your debts.
How can you build wealth in an age where people are dependent on credit cards and consumer credits for daily purchases?
First, understand the importance of a net worth statement. You can use it as a tool to do the following:
It is difficult to create a budget when you don’t know how much money you have in the first place. Your financial statement could serve as your guide in creating a budget and in analysing your debt repayment habits.
To know your NET worth, a simpler way to work out your budget would be to use online tools to help you figure out your important number. For a basic budget tool check out the ASIC MoneySmart Budget planner, or if you're wanting to track your spending along with maintaining up to date financial information, there are some a awesome wealth management App's that allow you to set up an account and link all your financial accounts in one place. Imagine logging into your dashboard and getting your up to date NET WORTH in an instance! Worth checking out. Get in touch if you're keen to find out more.
Second, analyse your assets.
Third, visualise your success.
You don’t have to wait for three or more years to see yourself successful. You can start doing it before you actually are. Make your mind believe that your life is better and happier now that you know how much your net worth is; this is what your reality will look and feel like. It can give you a definite desire to make purposeful purchases and sound financial decisions, until you have finally built up your wealth and achieved financial freedom.