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What the heck is a net worth, and why is it essential for building wealth in your twenties?
Over the past four years (after going on a long financial literacy journey), I took my net worth from -$15k to over $100k, and in this article, I'll show you exactly how I did it.
(plus, you're going to want to stick around. I'm giving out a free net worth tracker download below!)
In this article, I will be sharing my journey of how I grew my net worth from -$15k to over $100k in just a few years. I will break down my net worth, why it's important, where my net worth started, and how I achieved this milestone. I will also provide some tips for setting your own net worth goals. So, let's dive in!
Understanding Net Worth
Your net worth is the difference between your assets and liabilities and indicates your overall financial position. If you have more liabilities (debts) than assets, your net worth will be negative, but this doesn't necessarily mean you're terrible with money. For example, if you have a mortgage, the loan amount will be on the liability side of your net worth equation. Understanding the difference between good debt and bad debt is super important, but that could be an entirely separate conversation.
Assets and Liabilities
On the asset side of your personal balance sheet, you have the sum of all your assets, including things like:
Money in your checking and savings accounts
Balances of your investment accounts
Home equity
Car equity
Other income-producing assets
On the liability side, you have the sum of all your debts, such as:
Credit card debt
Auto loans
Mortgages
Personal loans
The difference between the assets and liabilities makes up your personal net worth.
My Net Worth Journey
I got super serious about growing my net worth in January of 2022, which was around -$15,000. When I first started my net worth journey, my assets consisted of:
Money in my high-yield savings account: $21,000
Money in my Roth IRA: $13,000
Money in my 401k: $2,000
On the liability side, I had:
Student loans: $38,000
Car loan: $11,000
This brought my net worth to around -$15,000.
Fast forward to today, September 2023, and my current net worth position looks like this:
Money in my high-yield savings account: $15,000
Money in my Roth IRA: $22,000
Money in my taxable brokerage account: $20,000
Money in my 401k: $24,000
Money in my business account: $36,000
On the liability side, I only have a car loan remaining. I have paid off all $38,000 of my student loans (yay!) This brings my total net worth to $113,774.
How I Grew My Net Worth?
A few crucial factors contributed to my ability to grow my net worth from -$15,000 to over $100,000 in a short time.
Starting A Business
Over the past two years, I've completely replaced my 9-5 job with income from my business. Which sounds intimidating or something that you wouldn't be able to replicate but I promise, I didn't do anything special. Around the end of 2021, I started working in the social media space (freelance management and marketing) and for about a year and a half did my 9-5 corporate job AND freelanced on top of that. It was definitely a grind but having both of those income streams played a huge role in me being able to increase my net worth so quickly. There are so many ways to make money today and unfortunately (with the way the economy is) a lot of people do have more than one stream of income in order to get ahead! Staying diligent about budgeting and tracking spending
Budgeting
Even as my income increased, I stayed on top of my budget and tracked my spending. It's a common misconception that all your financial problems will magically disappear once you start making more money. But the truth is, you need to be good at managing the money you already have before you can effectively increase your income. I developed good budgeting habits in college when I didn't have much extra money, and I carried those habits with me as my income grew. This allowed me to stay on track with my financial goals and make progress toward increasing my net worth.
For the past two years, I've been using this template to budget, track my spending, and make sure I'm hitting my financial goals:
Setting Financial Goals
Setting clear financial goals was crucial to growing my net worth. At the beginning of 2023, I set a goal to reach a net worth of $100,000 by the end of the year. This goal forced me to evaluate how much I needed to save, invest, and pay off to achieve it. Without setting goals, it can be challenging to make financial progress. Having a specific target to work towards helped me stay motivated and focused on my financial journey.
It's Your Turn!
Growing my net worth from -$15,000 to over $100,000 in just a few years required a combination of factors. Starting a business and having multiple income streams played a significant role in increasing my earnings. Staying diligent about budgeting and tracking my spending allowed me to manage my money and progress toward my financial goals effectively. Setting clear goals helped me stay motivated and focused on growing my net worth.
Everyone's financial journey is unique, and finding strategies that work for you is essential. By understanding your net worth, setting goals, and making intentional financial decisions, you can take control of your finances and work towards building wealth in your twenties.
Free Download: Get My Net Worth Tracker Here!
Let me know in the comments what your biggest challenges are in growing your net worth, and don't forget to subscribe for more money.
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