As we face the economic implication of the global pandemic, now is the time to take stock of your finances and create a game plan that will help you weather the storm. And the first step is to get clarity on your own net worth.
“Your net worth is the sum of what you own—your assets—minus the sum of what you owe—your liabilities,” explains personal finance coach Netiva Heard
“Assets can be your home, investment properties, vehicles [and] retirement accounts, as well as the money in your personal savings accounts,” she says. “Liabilities are all of your debts, from your mortgage, car loan, and student loans to your credit card balances.”1. Get Clarity
To give yourself a starting point, add up your net value, with either a pen and paper or an online net-worth calculator
Track Your Progress
Calculate your numbers regularly. “Seeing that figure grow or decrease will help you become more aware of your true financial standing,” Heard says. “It can help you decide the right time to acquire more debt [or] hold on to more cash, and can encourage you to develop a debt payoff plan.”
Even in economic downturns, opportunities to improve your bottom line exist. Cut unnecessary spending, so you can “put your money in places where it can grow, like the stock market or real estate,” says Saunders.
Play Defense and Offense
Up your assets and reduce your liabilities at the same time to increase your means. Actively work to decrease expenses by a minimum of 1 percent and increase income by also a minimum of 1 percent. “By doing this, we become cognizant of our expenses while becoming more in control of the money flow,” Heard observes.
Invest for Income
Income investing is a great way to increase your net worth—if done right. One strategy you can use is the bucket system. The main premise of this approach is that you’ll divide your liquid investments into four buckets: the cash bucket, the income bucket, the growth bucket, and the alternative income bucket.
By funding different buckets, you give yourself different assets you can draw on to fund your lifestyle before and during retirement. That can help to supplement other retirement income sources, such as a pension, annuity, or social security benefit
in conclusion , your net worth can improve significantly if you become more intentional about how your spending habit check and invest , also expand your sources of income, know how to get value for your time and most especially be ready to do all that it takes .