Have you been trying to improve your net worth lately? If you have, congratulations! You’re already miles ahead of the typical American. For the most part, the majority of the population is so worried about what people think about them that they never even measure their own net worth. I mean think about it. The average person has a car loan, a pretty beefy mortgage, and some credit card debt. It they keep this lifestyle up throughout their life, their net worth will never get above $20,000! Believe me, I’ve seen it.
I first started thinking about my net worth in 2010 and made some great decisions to pay off my student loans early and to start investing in my future. Take a look at the graph below. This shows you my entire life after graduating from college in 2008.
When I got out of school, I had those pesky student loans and the only thing I owned at the time was my cheap VW Passat. Overall, my net worth was in the negative (which definitely isn’t unusual for new college grads). In 2009, I got married, which suddenly added another $6,000 to my debt (due to her student loans). In early 2010, we decided that we were going to work hard to get rid of our student loans, and we were quite successful. By 2011, we were debt free and finally had our very first positive net worth (and boy it felt good)!
This is when things started to take off. We had zero payments each month, and in late 2011 we saved up enough dollars to buy a foreclosed house. We fixed it up and began paying down the mortgage, so by the end of the year our net worth was taking off to the moon! But, then the blip in the chart happened. This is where my wife decided to walk away and take half of the net worth with her. Naturally, 2013 was a tough year for me (both emotionally and financially). However, things are back on track now and if I hit my goal with the house payoff this year I will have quite a large net worth and will look to grow it even more in the years to come.
How to Improve Your Net Worth
So how did I increase my net worth by so much between 2013 and 2014? And how do I plan to double my net worth by 2015? Well, because I really want you to increase your net worth, I’m going to tell you the secret. Do it slowly.
Seriously. Back in 2009, I was investing in single stocks, had no emergency fund, and I really thought I was something. Well, I was something alright – really stupid. At that time, I got my hands on Dave Ramsey’s book and realized that I wasn’t quite as smart as I thought. Almost immediately, I changed my ways and began to follow Dave’s 7 Baby step plan to wealth.
If you have already started these steps, you know that this plan seems to take FOREVER! Fortunately for me, I didn’t have any big car payments or house payments, so I was able to get through step 1 pretty quickly. Then, by reducing my monthly costs, I was able to pay off my consumer debts in 14 months. Saving up my beefy emergency fund (step 3) took another seven months, and then things really started to roll. With a decent cash flow, I was able to just set up my investments to complete step 4. I have no children, so step 5 didn’t apply. So now, I’m working on paying off that house, and I feel like I am getting so close to step 7!
If you feel like the process is going slow, don’t feel bad. It’s supposed to. Plus, sometimes life happens along the way (like my divorce). I started clawing my way out of debt in 2010 – it’s now four years later and I am still not on step 7! However, I am now beginning to see the benefit of this plan. Once I pay off my house, my monthly expenses will dive down to about $1,500 a month. This reduction in costs is going to allow me to build some crazy wealth! And, it can do the same for you.
I would strongly encourage you to get started on this plan if you want to have a high net worth and a wealthy future. By paying off your debts, you are slowly increasing your cash flow, which, when put into assets and investments, increase your overall net worth! And, what do you think happens when you build up a high net worth? You can stop working at that job you hate! Give this plan a try (for at least a full year) and you will be amazed at how much more wealthy you will feel.
Are you working to improve your net worth? How are you doing?