Your Net Worth Matters More Than You Think: Here's How to Make It Work for You | INVESTEDMOM

When it comes to personal finance, there are many terms and metrics that people use to measure their financial health. One of the most important of these is your net worth. It's a simple concept, yet it's often overlooked by people who are trying to improve their finances. It wasn’t until I scaled up my real estate efforts that I realized just how important my net worth is.

According to a recent study by the Federal Reserve, the median net worth of households in the United States is $121,700. That being said, there is significant variation by age and income level.

"Your net worth is ultimately what matters. It's not about how much money you make, it's about how much money you keep and how much of that money is working for you." - Dave Ramsey

Keep reading to explore what net worth is, why it's important, and how you can increase it to build your wealth and achieve financial freedom.

What is net worth?

A recent survey by Bankrate found that only 31% of Americans have an accurate understanding of their net worth, highlighting the need for better financial education and resources.

Net worth is the total value of all your assets minus the total value of all your liabilities. Assets can include things like your savings, investments, and property, while liabilities can include things like debt, loans, and bills. The difference between your assets and liabilities is your net worth.

Why is net worth important?

Your net worth is an important metric to measure your overall financial health because it takes into account all of your assets and liabilities. By tracking your net worth over time, you can see how your financial situation is changing and identify areas where you need to make improvements.

The real reason why you should care about your net worth is that it's a key factor in achieving financial freedom. By increasing your net worth, you're building wealth and paving the way for a comfortable retirement, the ability to travel and experience new things, and the freedom to live your life on your own terms.

Ultimately, the goal is to have enough wealth and passive income that you no longer need to work to maintain your lifestyle. Having a high net worth means that you likely own enough assets to produce cash flow and, if you did it right, capital appreciation.

How can you increase your net worth?

Here are some key ways you can increase your net worth:

Pay off your debt: One of the most effective ways to increase your net worth is to pay off your debt. Your bad debt, that is. This will reduce your liabilities and increase your net worth. If you have high-interest debt like credit card debt, focus on paying that off first. By doing so, you'll save money on interest and be able to put more money toward your other financial goals.

RELATED Reading: Debt Repayment Strategies: The Debt Avalanche Method and the Debt Snowball Method

Save and invest: By putting your money into savings and investments, you can earn interest and see your assets grow, which will increase your net worth. There are many ways to invest your money, including stocks, bonds, and real estate. The key is to find investments that align with your risk tolerance and financial goals.

Increase your income: Increasing your income can help you build your net worth faster. Whether through negotiating a higher salary or starting a side hustle, finding ways to earn more money can be a game-changer for your finances. If you're interested in starting a side hustle, consider what skills you have and what services you can offer to others. Then, start charging for it!

RELATED Reading: Negotiating a Raise (The Ultimate Guide)

Reduce your expenses: By cutting back on unnecessary expenses and finding ways to save money, you can free up more cash to put toward your net worth. This can include things like canceling subscriptions you don't use, cooking at home instead of eating out, or negotiating your bills with service providers.

I usually caution against going full frugal because deprivation leads to a scarcity mindset and can actually trigger bad spending habits. Cut what’s unnecessary while still spending on experiences that bring you joy and align with your values. Tracking your habits and your expenses helps you more accurately track your net worth.

A recent article by Forbes highlights the importance of tracking your net worth over time and setting goals to increase it. The author notes:

"by setting goals and tracking your net worth over time, you can see how your financial situation is improving and identify areas where you may need to make changes."

What’s next?

Your net worth is a critical metric to measure your overall financial health. By increasing your net worth, you're building wealth and paving the way for a comfortable retirement, the ability to travel and experience new things, and the freedom to live your life on your own terms.

There are many ways to increase your net worth, so don't be afraid to get creative and find what works for you. The ultimate goal is financial freedom and the ability to live your life on your own terms. Living unrestricted!

Join the Wealth Builders Academy Membership and get access to a community of people on the same journey, learning how to become financially free and live an unrestricted life! 

Stay Invested xx

Meet the Author:

Inge was born and raised in Cape Town, South Africa, and moved to Canada in 2010 looking for a better life. She always had an entrepreneurial spirit and started her first side hustle when she was 9 years old – selling fudge at school during lunch breaks.

It wasn’t until much later that she realized that saving isn’t enough to get ahead. She was always very interested in real estate, but saving up for a down payment was grueling and slow, and the demands of life kept getting in the way.

She started investing in herself and upgrading her skills while learning how to invest. She quickly became debt free and compounded her money at a staggering rate.

It wasn’t until she became a coach that she realized how significant an impact she can make in people’s lives by sharing her journey, learnings, and processes.

So here she is, advocating for everyone who is invested and wants to build their wealth, especially the mommas!