Net worth is a calculation used to uncover your overall financial health. Understanding what your net worth is and how you stack up against others in your age group will help you gauge how much you can spend versus save on an annual basis.
Simply put, net worth is the difference between your assets and debts. So by adding up your assets, adding up your debts and then subtracting total debts from total assets, you arrive at a number which is your net worth.
According to the Federal Reserve, the average net worth for Americans between the ages of 55 and 64 is $1,167,400, while the median is at $187,300. Take these steps to increase your net worth this year:
There are remarkably wasteful ways Americans spend their money. USA Today listed 20 of the top ways recently, and chief among them were: wasted energy bills, daily coffee purchases, premium cable packages, traffic tickets, lottery ticket purchases, unused gym memberships, tobacco, alcohol, gambling, ATM fees, expensive (unneeded) warranties, credit card interest, and so on…
Wasteful spending can come in many different forms, and it's not the same for each person. For some, weekly stops at the local mall might be a problem. For others, it might be an addiction to pricey electronics and gadgets.
For a large percentage of people, however, it's food spending that's to blame for their money troubles. If you're heading out to a restaurant for lunch each day, for example, you could literally be eating your savings away.
Your debt is what could be holding you back from growing your wealth. By definition, net worth is assets minus debt. So if your debt is reduced, then your net worth naturally increases. But with high-interest rates, it could be taking longer than expected to pay down your debt. Making higher monthly payments or consolidating the payments could help reduce your debt quicker.
While you have a mortgage it's counted under your liability column, The equity in the house is an asset. Once it’s paid off the total value of the house is listed as an asset. So it’s doubly important to pay off your mortgage and own your home free and clear. Real estate is an asset that may appreciate over time.
Well-managed investments are assets that may appreciate over time and may add value to your positive column in the net worth calculation. Get advice from a knowledgeable advisor who understands the sensible middle-ground of investing.
Take advantage of tax-advantaged retirement plans, even in your lower earning years. If you start investing now, your net worth may increase at a much faster pace.
It can be easy sometimes to become passive about your future if you don’t have hard goals set in place. Come up with a plan as to how you’re going to grow your net worth over the next 10, 20, or even 30 years, and stick to it.
Manage your strategy
Once you come up with a plan to increase your net worth, check in with yourself, and calculate how you’re coming along with your goals on a regular basis. And, before making a big purchase or an investment, keep this number in mind to make sure you’re making the right financial move.
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.
Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
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David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC