The financial Manager of your household
As women, we take on various roles throughout our lives. One moment we are single and starting out our careers and in another moment, we find ourselves in other roles that include wife, mother, and boss lady; and many times, we take on these responsibilities simultaneously. I'm sure that many of you are champions in these roles, but there is one role that I want all of us to be champions of and that is the role of Financial Manager in your households. Regardless of whether you are single or in a partnership, you ARE the Financial Manager of your household and it is about time you start thinking and acting as such. As the Financial Manager of your household, it is your responsibility to manage how money flows through your life. We all know that money isn’t the most important thing in life, but what is also true is that money touches and influences just about everything that is important in your life. I will even go so far and say that when there is an absence of money, our problems just seem to get harder. How we manage our money has a profound impact on the availability of various choices or solutions we may need at any given time. So whether single or collaborating with your partner in this role, the responsibilities here should never be taken out of your hands. There are a number of factors can that influence a women’s ability to accumulate enough wealth to reach her goals or save for retirement, so throughout this series I will try my best to address them all, but with this post, I am going to start with your net worth. How do you define your net worth and what does is mean for you?
Your net worth is the most straightforward way to measure your financial health. It is essentially a snapshot of your assets ( everything you own of value) minus your liabilities ( everything you owe). As a financial advisor, with every financial move or advice I give to my clients, my ultimate aim is to increase their net worth. Therefore, as the Financial Manager of your household, this too, should be your aim.
How to calculate your net worth
Step one: Make a list of all of your assets and their value.
It should look similar to this:
Step two: Make a list of all your liabilities and their value.
It should look similar to this:
Step three: Calculate
This is as simple as taking your Total Assets and subtracting your Total Liabilities.
Formula: Net worth= Total Assets – Total Liabilities
Voila! That is your net worth staring right at you. Now what?
Evaluating your net worth
What if my net worth is negative?
If you are young or just starting out with your first career, it is common that your net worth may be negative. This is usually due to that fact that you could have a substantial balance on your student loans or it could also be given the fact that you have a much shorter time to practice building your wealth that you simply haven’t accumulated enough wealth through investments and savings as of yet. Either way, if this is you, time is still your best friend. Get in the game, or talk to a professional about how you can start building your wealth. If you don’t fall into the category of young(er) or you’ve been doing this career thing for a while, don’t panic. You still have some great options. If you find that you simply need to save more, you can start by executing a savings plan or be more aggressive and invest to grow your wealth. If debt is a big reason why you net worth is negative, one option you have is to execute a debt management plan that is designed to help you get out of debt faster and ultimately save you money in the long-term. Whatever the underlining problem is, these are all factors that influence your ability to make certain decisions or reach your goals.
How can I increase my net worth?
There are always moves you can make to increase your net worth. I’ve compiled a quick-fix list for you to choose from: 1. Paying off debt. Debt is the negative in all of this. It is therefore important to not let this area go neglected as it can have a huge impact on your financial future. 2. Find ways to increase your current assets. This may look like, investing more, preserving your earnings, or buying things that appreciate in value. 3. Cutting your expenses. When you cut down on your spending, you will have more money left over to invest into things that accumulate in value over time. In a future post, we will be learning about how you can create an effective spending plan.
What’s next and how often should I be checking my net worth?
You can repeat this exercise on a monthly, quarterly, or annual basis. At my Firm, my clients receive a quarterly report from me that goes into details about their net worth and how certain factors that are relative to them are effecting their goals and financial plan. Looking forward, I want you to remember that anytime you take on your debt, you are not only reducing your discretionary income, but you are immediately reducing your net worth. Think about this anytime you feel like using credit to buy assets like clothing or electronics. They may be great to look at but these assets tend to depreciate quickly as they are easily damaged or become quickly outdated. Next week, we will be talking about setting strong and rewarding financial goals. Therefore if you haven’t subscribed yet, please do so. :) On a final note, at Kaine Capital, our advisors are always on standby ready to help. It’s as easy as booking a free 30-minute consultation with us. To book, you can do that here. If you would like to learn more about Kaine Capital, please visit, www.kainecapital.com