When you read about the retirement of a well-known individual, whether it be a professional athlete or business mogul, do you find yourself curiously accessing your preferred web browser to immediately look up their net worth? Is it just me that puts myself in their shoes and begins to break down where I’d allocate money in my fictional retirement? Quite frankly, in terms of financials, the majority of us don’t have much in common with the athlete or high-profile business mogul. The keyword in that sentence is “much”, implying we do have “some” in common and that “some” is net worth. Congratulations, you and the recently retired Tom Brady are now more similar than you previously thought. Now, let’s jump into some methods that you can use to increase your net worth.
What formula makes up the illustrious phrase: “net worth”? Whether it is a business or individual, the formula is similar but to keep things simple I am going to stick with the individual. The formula is as follows: value of assets owned with monetary value – liabilities owed. Assets are considered to be things like money in your account, the value of your car, the value of your home, your investment portfolio, and so on. On the other hand, liabilities are your mortgage, your auto loan, credit card balances, and any other form of debt. As I mentioned prior, I like to keep it simple, so let’s look at three of the most common liabilities individuals carry.
Credit Card debt. It’s crazy, isn’t it? It all starts with mom and dad saying “just put gas on it, then pay it off.” (Don’t get me wrong, it’s top-notch advice.) As the gas tank of life begins to drain with things like medical expenses and car repairs, we act on that advice and begin to charge our credit cards which in turn decreases our net worth. Digging ourselves into a pit of high interest credit card debt can send us into the red but what I want all my readers to know is, you have options with the most popular one being credit card refinancing. To brag on my credit union, Go Energy Financial, we have rates on personal loans (used to pay off credit cards) that are much lower than the average credit card interest rate of 16.13% APR. When refinancing credit cards, the immediate liability is the same but at a lower interest rate leading to a lower monthly payment. A lower monthly payment means more money in your pocket, which can be used to pay off debt faster. Lower debt = greater net worth!
Next up, I know you can’t live without ‘em, the Auto Loan liability. I recently financed a new ride myself due to necessity so I’m very aware of the need for a reliable vehicle. The best piece of advice I have for you here, similar to credit cards, is understand your options. Taking on too high of an interest rate or financing an amount that’s out of bounds, can be detrimental to your net worth. It reminds me of a saying I once heard “When you give resources to one item, it takes away from another.” Understandably, sometimes we have to accept higher interest rates in order to have a vehicle to drive. In this case, refinancing could be an option for you. In conclusion, seek out the best interest rate (check out goenergyfinancial.com) for a vehicle, finance an amount you can afford, and always understand your options such as refinancing. Your net worth will love you for it.
The advice on the last item is going to be kept short and simple. I’m reaching out to all the college individuals. Pay down your Student Loans before they are due (even before graduation) if at all possible. Not only do student loans bring down your net worth, they can also impact your potential net worth. Be mindful of the future impact of long-term student loans that stretches 10-20 years. The longer the payment persist, the potential to build net worth goes down.
One last thing before I go and research the net worth of some more people: I want to give a shoutout to the culturally popular “side hustle”. Completing side jobs within your skillset raises your income which immediately raises your net worth. Quick disclaimer: if you are going to do a “side hustle”, make sure it’s legal, and please do not compete with your company while you are employed there.
Stay energized, Hunter
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