Easy Habits to Build That Will Improve Your Net Worth

There’s a difference between having financial riches and having financial wealth. To have riches is to have money. You can work a 9-5 job each and every day of your life and earn a lot of money. Do this, and sure, you’ll be considered “rich.” But what happens to the money coming in when you stop working? 

On our journey toward financial freedom, one essential question to ask ourselves is why we want more money. If we don’t have enough money to finance our calling in life, then we haven’t achieved financial wealth. That’s why having “wealth” is different from having “riches.” Financial wealth means owning assets that generate money for you, and in doing so, leverages your time to allow you to live out your purpose.  

Connecting our finances to our purpose isn’t all that murky on a conceptual level. We all have an idea of how much financing we’d need to live the fulfilling life we envision for ourselves. But just because we know what we want to accomplish doesn’t mean we know how to make it happen. There are steps that lead us to that financial freedom we yearn for. We must learn how to walk before we can learn how to run, after all. Taking steps today to build your financial wealth will only lead to more opportunities to build wealth tomorrow, which in turn will compound into independence and freedom. 

Those first steps to realizing that goal can be boiled down into three key actions and habits: 

1. Determining what our net worth is

2. Tracking our net worth on a monthly basis

3. Setting a goal around our net worth

1. Determine Your Net Worth

Calculating your net worth is a critical first step to knowing where you stand on the journey toward achieving your financial goals.

When we think of net worth, we can drill it down to what we are worth when we take all our holdings into account. Like Kiplinger explains, your net worth is the amount of money you’d have if you sold all your assets and paid all your debts. 

Calculating your net worth for the first time can take a little work. After all, there are a lot of moving parts that need to come together into one spot to get the most accurate view of your financial situation. But just like going to the dentist after a few years’ hiatus, scrubbing and grinding through the process is worth the financial health it will lead to. 

First, collect information on your assets. Determine the amounts you currently have in all of your accounts. You’ll need to consider checking accounts, savings accounts, CDs, and retirement funds like IRAs, 401Ks, and pensions. You’ll also need to count things like the current market value of your home, cars, antiques, and jewelry, as well as the cash value of any life insurance policies you may have. A general rule of thumb is if it’s worth something today, you should include it as an asset.

On the liability side of the equation, you’ll tally up the balances due on the debts you have. Again, anything you owe should be included in this category. For instance, if you have a mortgage or any other loans, credit card balances, or any taxes due, you’ll want to count them as liabilities. 

With this comprehensive list in hand, you can calculate your net worth by subtracting the liabilities from the assets. If you need a basic form to start imputing these numbers into, consider using a net worth calculator like this one. 

2. Track Your Net Worth on a Monthly Basis 

Keeping track of our net worth is a positive financial habit worth building. Knowing where that number sits now is just as important as knowing where it sits tomorrow. 

At the very least, keep track of your net worth on a monthly basis. It’s how we see the impact of the financial decisions we make and holds us accountable to doing better. If you purchase a new car, for instance, you can expect a hit to your net worth. On the contrary, if you just made that last student loan payment, you can expect an increase to your net worth. You’ll only know how your bottom line is faring if you are tracking it. Once you start keeping track of your net worth, you’ll know whether you are living within your means or inadvertently sabotaging your net worth journey. 

3. Set a Goal Around Your Net Worth

Now you can take what you know and set educated goals for your future based on it. Whatever your goal may be, once you know your net worth number, you’ll be forced to ask different questions around it. 

Your net worth can grow based on actions you take at each level of financial wealth. Beginners, for instance, may improve their net worth by taking a look at their top costs and reducing them or finding ways to make income off of them. At higher levels of net worth, increasing it can be more complex. In these cases, perhaps investing in a business is the way to add to your bottom line. Wherever your net worth is, it takes an honest look at the questions you ask around it to grow it to its full potential.

Good habits are always worthwhile to commit to building. When we focus on improving the core habits that influence our personal wealth, we are taking the steps to improve behaviors that ultimately help us to build our net worth. 

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