Why You Should Start Paying Attention to Your Net Worth NOW

Even if you make $200k a year, you can’t consider yourself “wealthy” if you don’t know your true net worth. A high salary doesn’t always correspond to financial well-being, especially if you’re not tracking your spending and paying attention to your debt.

Not sure what net worth is? It’s nothing complicated. Simply put, it’s the sum of everything that makes you worth something (financially speaking). Add up everything of value you own and the funds you have in cash and investments, then subtract any debt you have to calculate a comprehensive view of your money.

Now that you understand the concept of net worth, let’s talk about why paying attention to yours is vital if you want to stay on top of your finances.

It Helps You to Look at the Big Picture

Knowing that you have $7,000 in the bank isn’t helpful if you don’t know how much money you have in debt. On the other hand, some people have less cash in the bank but own several valuable investments or pieces of real estate. Therefore, you really can’t understand how financially successful you are until you see your net worth, not just a number in your bank account.

Additionally, net worth allows you to think long-term. It’s something you measure on more of a year-to-year basis rather than month to month.

Net Worth Allows You to Track Your Progress Over Years

Even if you track your spending weekly, you should take time every year to evaluate how your overall worth has changed and why. This will help you build a more complete understanding of your finances and what affects them, especially debt and investments.

According to The Balance, there are certain net worth goals we should all have at different points in our lives. For instance, by the age of 30, the site’s experts recommend that your net worth at least equivalent to half of your annual salary. I am more more aggressive. In a perfect world, you’ll have $250,000 saved by age 30. By age 40, it should be worth two times your annual salary.

Obviously, this is somewhat subjective, but the point is that everyone should set long-term money goals for themselves, and net worth can help with that.

You’ll See How Much Debt Weighs You Down

As I said before, a high salary and loads of money in the bank won’t make you a wealthy person if you’re weighed down by monumental debt. Sometimes, the only way to see the true impact of your credit card debt, car payment, and house mortgage is to add everything up. For example, you could have half a million in the bank but only be worth $100,000 if your debt is dragging you down.

Add up all of your investments and cash, then subtract all of your debt, including good debt (mortgages, student loans, etc.) and bad debt (credit card payments, car loans, etc.). Then you’ll get an accurate picture of your real financial worth.

The Bottom Line

When it comes to personal finance, your bank account is only a tiny portion of your monetary wealth. There are a million other things to consider, and a comprehensive breakdown of your net worth will help you evaluate everything.

If you’re not great a math, you can easily have the website Mint calculate your total net worth for you. Just add all of your accounts, from investments to credit cards, and then watch as the site begins tracking everything. Even if you don’t use it for daily transaction monitoring, it’s great for watching your net worth’s changes over time.

How to Stop Comparing Your Finances to Everyone Else’s

I recently read The Millionaire Next Door by Thomas J. Stanley and William D. Danko (which I highly recommend), and one of the biggest themes I walked away remembering was the concept of ignoring others. That’s not to say that being wealthy requires you to treat others unkindly. Rather, the process of true wealth requires you to quit comparing your finances, purchases, and achievements to those around you.

If you consistently find yourself jealously eyeing your neighbor’s new car or wishing you could make as much money as your older sibling, most financial gurus would agree that you’re holding yourself back. Not only is envy an ugly color for everyone, but it’s also a distraction that prevents you from making achievements of your own.

It’s impossible to totally ignore the success of others, but everyone should try to steer clear of coveting what others have. Not sure how you can possibly do that with others flaunting their good fortune in your face? Here a few tips.

1. Spend Less Time on Social Media

Although you might not think that Instagram, Twitter, Facebook, and other social media platforms have any bearing on your financial habits, they actually do. Every time you see a picture of some celebrity driving their brand-new car or a friend going on an expensive vacation, you’re asked to compare your finances to theirs.

Furthermore, social media actively encourages us to spend money and engage in compulsive buying. Your apps are constantly influencing your buying decisions, even if you don’t realize it.

According to The Next Millionaire Next Door , most millionaires spend 2.5 hours or so each week on their social media accounts. That seems drastically low when compared to the whopping 2.5 hours per day that most average users engage in. Perhaps their dedication to accumulating wealth discourages them from wasting time, or perhaps their ability to disengage from social media plays a role in their financial success.

2. If You Need to Compare, Look at Your Past Versus Your Present

Sometimes, comparison is necessary and healthy. For instance, it’s extremely smart to keep track of your finances so that you can see how far you’ve come in 10 or even 20 years. From now on, when you feel tempted to compare your success to that of others, consider comparing your current financial situation to your previous ones. Have you made progress? Where have you grown? Where can you continue to improve?

You’ll find that self-evaluation is much healthier and productive than envying those around you. Not only will it force you to better your finances, but it will also give you an appreciation for how far you’ve come over the past years.

3. Realize That Shiny Toys and Grand Lifestyles Don’t Equate to True Wealth

The average American household is at least $5,700 in debt. Together, all of the consumers in the country carry a staggering $1.003 trillion in credit card debt. Chances are, when you look at that friend who just bought a glittering new Mercedes, he didn’t pay for it in cash. Don’t assume that having the latest gadgets or the biggest house equates to a high net worth. For all you know, those people you envy are knee-deep in loans they’ll struggle to pay off for years.

What It All Boils Down To

Building wealth has nothing to do with the success of your neighbor or the failure of your coworkers. True wealth comes from dedication and self-control. Remind yourself of that when you start to covet the belongings and lifestyles of those around you. Reign yourself in and focus on your big goals, not what others have.

10 Ways to Nip Impulsive Spending in the Bud

Many Americans shop compulsively, which is probably why so many of us are looking for ways to curb our spending urges. You might have seen people stick their credit card in the freezer or leave their wallet at home when they go to the mall, just to avoid giving into the temptation of buying.

The problem with these techniques is that they don’t tackle the root of your impulsive spending problem: the way you’re thinking about shopping. If you think your spending issue is a short-term one, you can use 24Cash for a loan until your finances balance out.

Here are ten better ways to stop impulsive spending. The sooner you start implementing these techniques, the more control you’ll exert over your finances.

1. Don’t Quit Cold Turkey

As with any addiction, impulsive shopping is difficult to stop. Many people try to simply cut out the habit by taking away their access to money or promising not to buy anything for the rest of the month. However, studies have shown that “cold turkey” methods rarely work out for addicts.

Instead, focus on weaning yourself off of impulsive spending. Start by only allowing yourself to buy one thing on every shopping trip. Then, cut it down to one thing per week. Eventually, you’ll get to the point where you feel more in control of your buying habits. 

2. Make Yourself Wait

Don’t tell yourself that you can’t have that dress you spotted or those headphones you suddenly NEED. Instead, tell yourself that you must wait three days before you make the purchase. You’ll find that your desperation to buy the item may weaken over the waiting period. If it doesn’t, then you’ll be less likely to regret your purchase if you go back for it.

3. Beware the Traps of Social Media

Facebook, Instagram, Twitter, and all of your other favorite apps aren’t trying to help you save money. If anything, they’re begging you to pour more money into your favorite stores. Between the regular pop up ads for sales and the influencers who advertise products, your social media feeds are encouraging your bad spending habits. Consider limiting your time on these apps to decrease your urge to buy.

4. Tell Others About Your Goal

If you love shopping with friends, let them know that you’re trying to cut down on your impulsive buying. Everyone needs an accountability partner when they start changing their habits, and this case is no different. Ask them to remind you about your goals whenever you’re tempted to throw something in your cart.

5. Remember That a Sales Isn’t an Excuse to Buy

Just because something is 40 percent off doesn’t mean it’s something worth buying. Don’t let big sale signs or Black Friday throw you off track. Sales are especially dangerous because they encourage people to buy impulsively rather than intelligently, so beware.

6. Make a Shopping List and Stick to It

Like I said in the first part of this list, going cold turkey probably won’t work. To cut down on your spending without actually halting all your shopping, make a selective list of things you’re allowed to buy during the next month. This can include anything from new boots to dinner plates, as long as the items are things you truly need.

7. Find Activities to Replace Your Spending

Many times, people wind up shopping because they’re feeling antsy or stressed. Instead of relying on retail therapy, find other hobbies that benefit your life. For instance, next time you feel the urge to shop online, go for a run or learn to cook a new meal.

8. Set Goals and Look Ahead

One way to learn to love saving is to work towards a big goal. Maybe you want to travel to Bali next year, or perhaps you want to save up for a nicer car. Every time you start to buy something online or in a store, ask yourself if you would rather put that money towards your goal. Often, the answer will be yes.

9. Ask Yourself Questions Before You Buy

There are three big questions you should ask yourself before you buy anything: (1) Do I need it? (2) Do I love it? (3) Is it a good price? If the item you’re considering doesn’t earn a “yes” to at least two of these three questions, then it’s probably not worth spending your money on.

10. Give Yourself One Splurge Day Every Now and Then

Instead of spending little bits of money here and there throughout the month (that eventually add up), give yourself one shopping budget and spend it all in one splurge day. This will allow you to cleanse your mind of shopping urges, but you’ll also still be in control of how much you’re spending on non-necessities.

Learning to shop purposefully, rather than impulsively, is difficult for most American consumers. However, doing so will radically change the way you view money and your lifestyle in general. Start today so that you can have a more meaningful, financially-stable future.

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