Estimated reading time: 14 minutes
Building wealth from nothing is the path many of us will take, but along the mystical route of debt reduction and increasing net worth, motivation is a crucial tool for success.
Finding ways to be happy is difficult, especially when you’re in the dumps about your money situation.
What Is Debt Reduction?
The only way to start building wealth is to explore debt reduction strategies to help with financial problems that may be causing you stress.
I understand why someone might classify having debt under the good debt category and the bad debt category.
In my eyes, all debt is bad, even to increase wealth through education or business adventures.
However, managing debt means your debt-to-income ratio is what matters the most.
If you are serious about getting help with debt, don’t start by making excuses.
Own it and get a move on, creating a plan that will work to pay it off fast.
Debt is Debt, and I stand by that.
If you change your financial mindset to that of a successful business owner, you’ll soon see how critical debt reduction is for all your liabilities.
I remember when I reached the point that I had no intention of creating more debt unless it was to increase wealth.
Is that risky? It sure is, but without risk, we also don’t build wealth.
In a way, I’m still that same guy, just a bit older and with grey hair.
Unless you’ve vast amounts of money to play with, debt is like a wasp that won’t disappear.
It keeps buzzing in your ear and circling, waiting for you to go in for the sting.
Yes, I wouldn’t say I like wasps as much as I do debt) Having debt is a pain in the butt too.
Although we can’t swat it, we can crush it, which seems better than the risk of getting stung.
Don’t Give Up On Debt Reduction And Don’t Give In
Today, most people own a car, a house, or both and rely on credit cards or a line of credit to survive when income is not covering expenses.
Personal or not, it’s still debt, and if your name is attached, you have to pay for it.
Debt reduction seems to be one of the most challenging financial plans for people to stick to aside from using a budget.
It’s like being on a weight-loss diet, but occasionally, you sneak in a donut or two.
You begin to see debt reduction and get excited that you’re in control, so you splurge a little.
For many, that splurge leads to continued lousy money habits and the ability to fall off track.
Your best form of action is to forget about rewarding yourself with stuff every time you reach a debt reduction milestone and focus on feelings.
I’m sure that if you take the time to explore your trail of success, that will be rewarding enough.
You don’t need to buy a new outfit or camera just because you’ve paid off your credit card.
That’s not how a successful business runs.
If you will use the camera to increase your wealth or reduce debt, then that’s a different story.
Otherwise, put money to work for you, not against you.
Risks You May Be Willing To Take
Have you ever heard the saying, “If you want to build wealth, you must take risks?”
Indeed, each time we spend our money, we take a risk, whether buying a coffee, a new vehicle, or investing in a house or business.
If you want to learn how to get wealthy without worrying about if you are doing it right, the first thing you must address is debt reduction.
Often, the focus is not on learning how to tackle debt reduction like a bull but rather on how it will feel to be debt-free.
You can’t get to the bottom of the chocolate sundae where the hot caramel fudge is unless you dig through the hard ice cream.
The same goes for debt reduction, except the incredible feeling of having little to no debt doesn’t go away as instantly as the delight of a spoonful of ice cream would.
Does anyone want ice cream now?
I sure do. Maple Walnut, Pralines n Cream with a heavy dose of caramel sauce and nuts topped with whipped cream.
Are you smiling yet?
I hope so because being in a debt crisis can take shots at happiness and pull on the heartstrings.
Debt affects so many aspects of our lives that getting rid of it is the only way to uncover the black cloud cast upon us.
Waking up to a new day with little to no debt seems like a great plan.
You can do it.
5 Benefits of Debt Reduction
Starting a debt reduction plan comes with more motivational benefits than you will ever dream of, especially when experiencing the effects of a money slump.
1- Increase In Happiness
I have yet to meet someone who has conquered debt and been sad about it.
Please get rid of it and watch your mood return to that of a child with no responsibility (even though we know that’s never going to happen).
My point is that knowing you can walk out the door every day without owing money to someone for good or bad reasons makes even a cloudy day a sunny day.
2- Increase in Options
When you kill debt, you start to open up more options for yourself, whether it be to save more for retirement or save up for a holiday.
You can do things today without added financial stress, even if it is taking a holiday with debt.
When you return, the debt will remain there, but if you fly debt-free, you will come home debt-free.
3- Increase in Wealth
Now that you are working on debt reduction or whether you are already there, the fun part is increasing wealth.
The best way to build wealth is to have money to put towards wealth-building ideas rather than paying back debt with nothing to show for it.
The first thing I did once we became debt-free was start to pay more into my retirement savings than I was when we did have a mortgage and car payments years ago.
4- Increase in Financial knowledge
This is a big one because most people who start their debt reduction plan by hunting online for personal debt stories or ways to reduce debt invest in themselves.
When you’re motivated to pay off debt and see the results, you crave learning more about other ways to kill debt.
Compare this to starting off walking on the treadmill, and in a few months, you start to see weight-loss results, so you decide to take up running instead.
Running helps you to feel amazing, and your weight drops further.
From there, you start lifting weights because you see how the change impacts your mind and body.
The same thing happens when you become a wealth builder and debt killer.
Build strength by taking control of the situation.
5- Increase in Motivating Others
This happened to us, and it will happen to you.
Take the scenario above where you’re losing weight, and people notice.
They start to ask you questions about your journey, so you take the time to educate them so they can work harder and smarter.
You might get the ambition to help a parent, sibling, relative, or friend by sharing your story and the financial tools you used to plan your debt reduction.
Not everyone talks about money and debt because it’s taboo, but it shouldn’t be.
Motivating others with your success is one of the best feelings in the world.
Starting on the walk of debt reduction is not a fun place, but it’s worth it.
Remember, you will always be stronger than the day before, even if you eat ice cream.
Yes, I want to be that guy right now.
Every step you take, even if small, means you’ve reached a point where you want out.
I hope that whichever route you take, one day, you do the same for others who are feeling overwhelmed with too much debt.
Are you still thinking about that ice cream?
Damn, I am, and it’s 4 am as I type this, and I’m smiling at the screen, hoping that someone is smiling back at me.
Have a great day, everyone.
Discussion Question: What or who motivates you to jump into debt reduction mode?
Our Net Worth January 2017
RESP Contribution 2016: $208.33 a month.
Changes to our Net Worth Calculation in January
Another year and another goal to achieve.
According to our growth trend, we should hit the million this year, but that’s only if things go our way.
There are no guarantees that this will happen, so I won’t be disappointed if it doesn’t happen this year.
At the start of this year, we lost some of our assets due to depreciation.
I’ve dropped the value of the vehicles again, so now they are worth $4,000 in total.
If we sold them and got more than $4,000 for them, it would be a bonus.
Do I want to get a new car?
No, there’s nothing wrong with the ones we’ve got.
For the rest of the net worth, we could do with some improvement.
The investments didn’t do very well at all. Can I blame this on Donald Trump?
Probably not, but it’s a good excuse.
The only reason our net worth went up was due to our income, but even that wasn’t brilliant due to illness and lost time.
Good news on the house front, though.
The same model house as ours sold recently for over $500,000.
Will I reflect it in our net worth?
No, the housing market can’t be sustainable at this rate.
Understanding Your Net Worth
What Does Individual Net Worth Mean?
Net Worth is a snapshot of your financial health, like a picture of debt to net assets. In simple terms, it’s a total of the value of your assets minus your liabilities.
We credit the growth of our net worth to patience, perseverance, using a monthly budget, and not giving up.
Your numbers may go up and down, but don’t let the numbers scare you. Instead, understand why and move on.
Free Savings Tools
If you would like to use our budget, I offer a FREE downloadable budget that you can use at home just like we do.
I don’t charge for it because I want you to save money, not spend more!
There are tonnes of other free printable lists offered at Canadian Budget Binder to help you achieve some of those financial goals and build your net worth.
Now, determine just how much net worth you have and go from there.
Enjoy, and let me know what you think.
How To Determine Net Worth
Figuring out net worth is relatively easy as long as you know your numbers or monthly finances, so you must do your homework.
Net Worth is simply adding up all your assets (what you own) and then taking away your liabilities (what you owe), giving you a net worth number.
Understanding your net worth will help you determine if you are on track to meeting or beating your personal financial goals.
It doesn’t get any easier than that.
Net Worth = Assets – Liabilities
Calculate Your Net Worth
Do you know how to calculate your own Net Worth?
Now you can stop asking yourself the question, how do you find out your net worth? Why? It’s easy to determine.
We like calculating our monthly net worth to know if we are still on track.
Some people calculate it yearly or quarterly. It’s really up to you and how informed you want to stay regarding your financial health.
Net Worth is an estimate, and not everyone uses the exact figures.
Some people don’t include vehicles like we do or may leave out the assets inside the home as we have.
It depends on what you want to calculate or what you can sell today and make money on.
Why not go ahead and calculate your own using our Free Money saving Tool, Net Worth Calculator (Canadian Budget Binder 2012)
Why You Should Set Financial Goals
Below is our progression chart towards our goal of a million dollars in net worth, which should happen according to our net worth calculations by mid-August 2017 (this year).
Setting goals is the only way we work towards achieving what we want to be done as a couple around the house and in our financial lives.
Without them, we would be flying by the seat of our pants, which wouldn’t work for us.
I find it’s much easier to be held accountable when I share what we need to do with all of you.
Yes, Mrs. CBB refers to the list when she asks what I plan to do next. I’m not sure if that’s a good thing for me or not.
In the graphical representation above, I have used Excel to provide a trend line prediction based on the past year’s monthly net worth figures.
Using figures from our actual net worth gains over the past 12 months (the solid blue line), it has been suggested that by the end of this year (2016), we should be around $900,000.00.
We fell short of this goal by $9000, which is perfectly fine as it was only an estimated goal based on current financial trends.
This can change over the years and is only a prediction based on known historical figures from our finances.
According to the chart, we should hit the million mark from August to September 2017.
This is nice to know, but anything can happen over the
next year. Hopefully, with careful planning, we can achieve this goal and go beyond it.
Discussion: Do you set financial goals for the year?
Please leave me your comments below.
Monthly Budget Update
When budgeting, anything is possible; we are proof of that, although we still have a long way to go in our journey.
These are our numbers and goals, not a means of comparison between your own goals and others’ target goals.
We don’t care how much money others make if they have a high net worth or are lower than ours, as it’s not a competition.
I hope our experiences will help guide you along your financial path, working towards debt freedom.
Different Financial Paths
Not everyone has the same path in life.
Some of you may have had to start over like I did or go to school again and now have OSAP loans to pay back.
Some of you may have been given trust funds, paid-for homes, paid educations, or perks in life that give you a financial kick-start, and that’s OK, too.
Remember what I said, “It’s not about how much money you make; it’s how you save it.”
.” cus on yourself, and don’t let the evil eye of money jealousy or keeping up with the Kardashians cloud your vision.
No one cares about your money as much as you do, so don’t waste your energy trying.
The only reason people accumulate wealth is because they know how to save or invest it wisely, even if they did inherit money or win the lottery.
The most minor improvements should mean significant strides in reaching your goals.
Sometimes, we have to fail to learn, and we’ve all been there.
Money can be an evil force for some people, especially those with a negative attitude towards their financial situation.
I urge you to be optimistic and, little by little, with determination too, should see improvements if you want that to happen.
Net Worth Updates 2017
Below, you can click the links to read previous months’ net worth updates for 2016 to see how we made out following our financial rules.
In the last year since January 2016, our net worth, according to our figure, has grown by $118,920.69
January 2017 $894,357.51 – January 2016 $775,436.82 = +$118,920.69
- November/December 2015
- January 2016
- February 2016
- March 2016
- April 2016
- May 2016
- June 2016
- July 2016- Oops, it looks as if I missed this month.
- August 2016
- September 2016
- October 2016
- November 2016
- December 2016
That’s all for this month’s net worth update, but please check in at the beginning of March 2017 to see how we made out in February 2017 and what has happened to our finances.
Remember: “It’s Not About How Much Money You Make. It’s How You Save It“