Today is officially Be a Millionaire Day! And I’m not going to lie – as a kid I always dreamed of what it would be like to be a millionaire and of course, how I was going to achieve that status. While being a millionaire looks a whole lot different than I had originally thought (no more visions of the movie Richie Rich in my head 🙂 ) I still have the goal of getting there sooner rather than later.
In honor of Be a Millionaire Day I decided to track my net worth (something I rarely do) and look at my plan and other options for growing that net worth.
Here’s what I’ve come up with.
How to Track Your Net Worth
Net worth is the amount of assets you have minus all of your debts. It’s often used as a snapshot of how well someone is doing financially at any given time and is a way to track your progress to millionaire-dom.
This is a number I don’t normally pay much attention to for a couple of reasons. First off, I’m more concerned with cash flow than net worth. And secondly, since a good portion of the average person’s net worth (including mine) is tied up in their primary residence, net worth can be a little misleading.
Clearly net worth isn’t the perfect calculation but it can still be pretty useful. It’s the most common way to track financial well-being. Plus, if you continually track your net worth, like every quarter for example, you can easily see your own personal financial improvements.
Are you ready to figure your net worth?
Add up all of your assets (home value, KBB car values, investments, savings accounts and checking account balances.) Once you have your total assets subtract your liabilities (all debts).
That end number is your net worth.
How to Make a Plan to Grow Net Worth
Growing net worth is actually a fairly simple concept. All you need to do is increase the value of your assets, decrease your liabilities or do a combination of both.
Here are common ways to increase your net worth.
Pay Down Your Debt
One of the smartest and easiest ways to grow your net worth is to pay down your debt. The more debt you pay off the higher your net worth will be, assuming all of your assets increase or maintain their value.
Save More Money!
Saving money is critical. Not only does your savings make a positive impact on your net worth, but without savings it’s hard to make investments.
I recommend that you have separate savings accounts for your emergency fund and other savings. An emergency fund will help you maintain financial stability in the event of an unexpected expense or income loss while other savings accounts can be used to reach your financial goals or just to accumulate enough cash to take advantage of unexpected investment opportunities, should they arise.
Pick Investments That Work for You
Not all investments are created equally and different investments suit different personalities. Here are common investment ideas to consider.
Stocks Market Investments – Stocks and bonds are what most people think of when they think of investing. This type of investing is easy to get into since you can start with as little as ten dollars. However, stock market investing can be risky depending on how you go about it.
(Here’s how to invest in the stock market for beginners.)
While stocks and bonds can be great investments they’re not the only option and definitely aren’t for everyone.
Certificates of Deposit – Certificates of Deposit (CDs) are low risk ways to invest money and earn more than you would with the cash parked in your savings account. CDs are basically a promise to a bank that you’re going to leave your money in the account for a specific amount of time in exchange for a specific interest rate.
Discover Bank has options for CDs with terms ranging from three months to ten years or the ability to invest in Certificates of Deposits within an IRA.
Real Estate – Real estate has always been one of the most appealing options to me since I have family members who invest in this manner almost exclusively. There are many ways to invest in real estate including land lording, flipping houses, and investing in REITs.
Your Own Earning Power – While this type of investment isn’t going to immediately show up on your balance sheet it can be one of the most powerful investments you make. If you invest in learning new skills or in your career advancement you could, in some cases, drastically increase the amount of income you earn.
This is why, over the past few years, I’ve been more and more open to taking courses that improve my skillset.
Use a Combination of Strategies to Increase Your Net Worth
Using a combination of wealth building strategies can be a way to mitigate risk and help your net worth grow. My financial plans over the next several years include:
- Pay off Mortgage
- Invest in My Businesses (Increase income to increase savings.)
- Continue investing in my IRA
- Increase Cash Savings
- Save for real estate investments
And remember, your net worth should not be tied to your self-worth. If you’re starting with a low or negative balance don’t beat yourself up. Simply pick a few goals to work on and be consistent with them. Overtime you’ll see a steady uptick in your overall financial well-being.
What steps are you taking to hit that millionaire status?
A big thanks to Discover for sponsoring this post. All opinions are my own.
Photo Credit: photoman / 123RF Stock Photo
Great post. I think the downside to real estate is the debt and the possibility of renters trashing the place. The solution is cash. ; )
The cool thing about stocks is that you can sell some of them but not all of them. Say you needed 10k. It is much easier to sell 10k worth of stocks then 10k of a house.
Very good point on the stocks!!
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