The Importance of Knowing Your Net Worth
As we head toward the finish line of 2020 and gear up for 2021, setting goals and getting your life in order should be a priority. One of the best places to start is by understanding your net worth and determining if you are on track to meet your goals.
Your net worth provides a snapshot of your financial situation. If you calculate your net worth today, you will see the end result of everything you’ve earned and everything you’ve spent up to right now. While this figure is helpful, tracking your net worth over time, offers a more constructive view of your finances.
When you see financial trends in black and white, you are forced to confront the realities of where you stand financially. Reviewing your net worth statements over time can help you determine 1) where you are, and 2) how to get where you want to be. Each person’s situation is unique and planning with a financial professional will help you determine your ideal net worth.
Spend Wisely – To keep debt from accumulating unnecessarily, consider if something is a need or a want before you make a purchase. To reduce unnecessary spending and debt, your needs should represent the majority of your spending.
Pay Down Debt – Reviewing your assets and liabilities can help you develop a plan for paying down debt. When in doubt, crunch the numbers to see if it makes financial sense to pay down a certain debt, taking into consideration the impact of no longer having access to that cash.
Save and Invest – If your net worth statement shows that you are on track to meet your financial goals, it can encourage you to continue what you’re doing. Conversely, if your net worth indicates room for improvement, it can provide a needed spark of motivation to take a more aggressive approach to saving and investing your money.
A comprehensive financial plan can help you make the right investment decisions and prepare for retirement. To develop a strategy that’s right for you, give us a call.