You would like to increase your net worth. What do you do?

GETTING STARTED

At this point, you have looked at your personal cash flow statement and net worth statement and have reached a conclusion: “I need to increase my net worth”. The question then becomes, how do I do so?

The ideal way to start is to increase the amount of your net cash flows. You want to make sure, that after paying all your necessaries (necessary expenses like rent, insurance, mortgage, etc) that you have money left over (net cashflow). Since you cannot do anything about the money you have, the only option you can actually control is the money flowing out (expenses). You need to look at the expense section of your cash flow statement and ‘trim the fat’. What is unnecessary? What can I do without? or what am I willing to sarifice in order to have a better financial future?

Personal finances are not like growing up or taking a class. There is no one behind you buging you to do better or assigning grades for how well you do. It is all about having the determintation to do what you have to do. When it comes to removing expenses you don’t need (like that extra pair of shoes, or cutting takeout from 4x a week to 2x a week), you most likely won’t succeed the first week or month or 3 months. But everytime you fall off the wagon, climb back up again. It is important that you NEVER EVER give up.

WHAT DO I DO WITH MY NET CASH FLOWS?

When you cut down the expenses, your net cash flow will likely increase, a little bot ior a lot, depending on your finances. The next question is this: What do I do with my net cash flow?

Well, you ideally want to save that money and have it accumulate interest somewhere. However, if you owe a large amount of money, you might want to consider paying down your debt. If you have a significantly large, negative net worth, you really want to consider payig off your debt before you start to save. We discussed this in an earlier post but it is worth repeating: Debt grows at a higher rate than savings. While you are placing the money in savings, your debt is happily multiplying – without your consent

So, when you get to apoint where you have positive net cash flows, apply those to your dent. It doesnt matter whether its $50 a week or $50 a month. Just try as much as you can to pay off the debt.

I HAVE POSITIVE NET CASH FLOWS AND A POSITIVE NET WORTH. WHAT DO I DO?

If you have high positive net cash flows and little debt or posisitve net worth, you can split your money. You can split the positive net cash flows however you want and apply some to your debt and apply some to savings or to your assets. Personally, I’d rather pay off ALL my debt before saving. But the finances in queston are yours, not mine .

I hope that this personal finance series have helped you. If you have any questions, send an email to blog’at’coursesathome.org. Replace ‘at’ with the symbol @.

To take an instructor led class, visit Courses At Home and fill out the registration form in the Courses and Registration page.