There are a lot of words used to describe wealth. One of the most common terms is net worth. So what is net worth and what exactly does it mean for your finances?
Net worth is the value of everything you own minus what you owe. Net worth is also a great metric for determining a person’s financial health. But we’ll get into all that in just a bit. Ready to learn what your net worth is and how you can boost it? Keep scrolling!
How To Calculate Net Worth
You can calculate your net worth by subtracting your liabilities from your assets. We’ve listed the most common types of assets and liabilities. Remember, when determining the value of your assets, make sure to take into account the market value of your home, car, and other valuables – like jewelry, art, and antiques. If you own a business, its value and the percentage you own also contribute towards your net worth.
|Real Estate (Market value of your home)||Mortgage|
|Checking Accounts||Credit Card Debt|
|Savings Accounts||Personal Loans|
|Retirement Accounts||Student Loans|
How To Build Your Net Worth
You can have a sizable salary, but if you’re a big spender or have a mountain of debt to your name – your net worth is probably not at its best. On the other hand, if you have a modest salary but you’re a thrifty shopper and passionate about saving – your net worth is likely to be in good shape.
That’s what’s great about net worth. No matter if you’re starting with a little or a lot, the same strategies can help you build up wealth. Here are some of the most important steps you can take.
Start a Savings Plan
This may not come as news, but saving is one of the fundamental strategies for boosting your net worth. A budget can help you determine exactly how much money you have coming in, how much you’re spending, and what you have leftover for savings.
The good news is that nowadays there are many banks and budget apps that can help you track your spending habits. Once you know how much you’re spending each month, it’s time to start cutting off unnecessary expenses and redirecting that money towards savings.
Auto Invest Your Savings
Savings accounts at traditional banks are among the surest ways to keep your money safe. But if you want to see higher long-term gains, you’re better off opening an investment account. If you want to watch your savings grow even faster, you’ll want an investment account that offers auto invest.
Auto invest automatically transfers money from your bank account into your portfolio on a regular basis. You can choose how large and how frequently you want the deposits to be. MoneyLion offers auto-invest with all of its investment portfolios.
Owning property is an amazing way to diversify your investments and build your net worth. However, real estate requires a large minimum just to get started. If you don’t have a lot of capital, try looking into buying stock in companies that own income-producing real estate, otherwise known as REITs.
On the other hand, it’s a smart idea to build up your savings until you have enough to pay for a down payment on a home. Being a homeowner is almost always a smarter financial choice than renting. But in order to purchase a home, you’ll need an adequate credit score.
If your credit score is less than perfect, you might face challenges when applying for loans, mortgages, credit cards, and more. The good news is there are ways you can boost your credit score in a short amount of time. For starters, it helps to take out a credit builder. A Credit Builder Loan is designed to help you boost your credit score safely, quickly, and inexpensively.
Pay Off Your Vehicle
Owning your vehicle means it is no longer a liability. If you have enough cash sitting in your bank account, it’s probably worthwhile to pay off or at least pay down what you owe on your automobile and avoid the high-interest rates that auto loans charge.
Pay Down Debt
Debt is another major liability that will weigh on your net worth. Try to eliminate or pay down your debt as soon as possible. If you have a ton of credit card debt, consider refinancing to a lower APR. If student loans are holding you down, look into qualifying for student loan forgiveness or other relief programs.
Credit cards charge enormous interest rates that weigh on your finances and keep you in debt. Make sure to only rack up a credit card balance that you can realistically pay off at the end of the month. All in all, avoiding additional debt is a proven way to boost your net worth.
Nowadays, there’s a ton of opportunities to earn extra cash on the side. Look into potential side gigs. Maybe you can rent out that extra space in your home, drive for a ride-sharing company, or even pet sit. You can also ask for a raise at work. Embrace new possibilities to increase your income.
Insure Your Assets
Emergencies happen. However, the financial burden or an emergency can be mitigated if you’re properly prepared. That means opting into insurance products on your property, auto, health, life, etc,. This way, you’ll avoid the cost of potential liabilities if and when an emergency hits.
MoneyLion helps you monitor your insurance needs with top-tier financial tools like Financial Heartbeat. Financial heartbeat tracks your financial health by determining how well you’re performing across key sectors like credit, budgeting, saving, and insurance.
Use MoneyLion To Boost Your Net Worth
MoneyLion is an online banking and personal finance app that can help you accomplish your financial goals. Whether you want to increase your net worth, improve your credit score, or even manage your spending better – MoneyLion can help you get there.
MoneyLion’s online bank account, RoarMoney, comes with a host of financial tools and bonuses to get you in control of your finances. You can view your spending, access budgeting tools, and even keep track of your total financial health.
MoneyLion also offers fully managed investment portfolios that customize according to your financial needs and risk tolerance. There’s no better way to get a head start on building your net worth. MoneyLion has banking solutions to help you reach your financial goals and then some!