Debt | Our Net Worth

How To Improve Your Negative Net Worth : January 2020 Net Worth Update (-0.11%)

Negative Finances

A Negative Attitude Won’t Fix A Negative Net Worth

Having a negative net worth should be an overly worrisome situation and you must be aware of good debt vs bad debt.

Even if you’re a late starter and have a negative net worth there’s still time to recover.

Don’t live in fear that you will never get back on track as that’s not the motivation you need.

The reality is that we are a consumption-based society and thrive off of marketing and owning new stuff.

Most people don’t start to see a positive net worth until they are into their 40’s or perhaps earlier based on their financial situation.

Once you jump over to the positive side of net worth you’ll start to see it increase provided you stay the course.

Calculate Your Net Worth Every Month

Knowing your net worth is important as it paints a picture of how well you are managing your financial situation.

In basic terms, your net worth is your assets-total liabilities = your net worth.

So, whatever you own straight up (asset) minus what you owe to someone (liability)

Tracking what you owe and what you own similar to what we do on the blog monthly is a smart way to keep on top of your money.

At the same time, using a net worth tracking sheet and finding a negative net worth doesn’t mean you aren’t working hard at increasing wealth.

It simply means you need to evaluate your priorities so you can get out of the red and into some green!

Is Mortgage Debt Part Of Your Net Worth

You have to understand there are always going to be situations in your life where you have to make financial decisions that may include owning the debt.

For example, buying your first house.

When I bought my first house at age 21 I had no student debt or consumer debt and I was pretty happy about that.

I was fortunate to not have a negative net worth and was in the green as I’d saved up a nice lump of money.

The moment I bought my house almost all of my savings apart from emergency cash bled into my new mortgage.

It was then I became a 21-year-old guy with massive debt but a lovely flat to show for it.

Was I worried?

Not at all because this is a part of life.

Not many people can walk into a bank and tell them they are paying cash to purchase a home.

If you want to become a homeowner it’s inevitable you will have debt.

Is A Mortgage Bad Debt?

A mortgage is not necessarily a bad debt however it’s debt and for me, that meant I wanted to get rid of it, and fast.

Depending on mortgage amortization, downpayment and interest rates some people can crush a mortgage in 15-20 years.

Two important factors to consider, force majeure and employment circumstances.

Using Equity To Pay Debt

Personally, I’d steer clear of removing equity out of your home to pay off debt even though many people do it.

To me, that’s just a revolving door of financial disaster that ends up costing you a fortune in the long-run.

If you’re able to find alternative sources of income to get rid of consumer debt if you have creditors knocking on your door.

However, for those of you putting your equity to work to earn more money than that might be a different story.

Even then, the risk can be high because anything can happen when it comes to investments.

Another thing to consider is that not everyone wants to own a home and would rather rent.

This makes entering a positive net worth a quicker process since you won’t have a massive mortgage loan.

Related: How we paid our mortgage off in 5 years

Student Debt and Negative Net Worth

Just because you go to school doesn’t mean you need to come out with student debt.

Related: How I paid off my OSAP loan fast

By this, I mean for those students who were able to prepare years in advance by working and saving as much money as they could they’ve put one step ahead of the rest.

I had to work while I was going to University to help offset the costs of living, grocery and transportation.

On the other hand, there are many students who have their education fully paid for or in some countries there are no education fees at all yet, the debt still finds a way to creep in.

I honestly believe that even if there were no student loan debts that people would still find a way to rack up debt.

There will always be something to blame our personal debt crisis without taking ownership for our situation.

But here’s the thing, having a negative net worth can be a bit scary especially if you are fresh out of college or university.

Whether you have student loans to pay back or credit cards that are maxed out you’ve got your work cut out for you.

Own it, and start paying it back and if you can increase your payments or make lump sums, don’t hold back.

Financial Impacts To Your Net Worth

Believe me, creating a positive net worth takes time and once you have kids it becomes even harder.

Luckily for us we had our mortgage paid off months after our son was born which helped us save more.

If we hadn’t we’d certainly struggle to keep up with all of the expenses that come with being parents.

  • Sports
  • Education Costs
  • Higher Education Costs
  • Weddings
  • Extra-Curricular activities
  • Clothing

However, there are parents that simply can’t afford to do any of the above for their children.

Plenty of parents hold back on their retirement savings to make sure their children are taken care of until they leave the house.

Sometimes this means that when it comes to retirement they haven’t saved up as much as they had anticipated.

This also comes to question the length of time someone has to work into retirement.

If you don’t start increasing your net worth before retirement you may be forced to work longer.

Related: Couple’s happy retirement on hold until son moves out of the house

A few of the reasons may be:

  • High consumer debt
  • Not earning enough money
  • Other priorities
  • Tight Budget (ability to meet financial goals without anything left to spare)

6 Ways To Improve Your Negative Net Worth

  1. Stop Taking On New Debt
  2. Pay Off Your Consumer Debt and Mortgage
  3. Live A Full-time Frugal Lifestyle
  4. Stop Buying New Vehicles and stick with one
  5. Network To Increase Career Opportunities to increase your net income
  6. Earn More Money and SAVE IT!

We didn’t wait until our mortgage was paid before investing in retirement so it’s critical that you watch your numbers.

Investing and debt repayment are all part of a balanced budget and consumer debt is the worst debt you can own.

Once you have your debt and student loans paid off make sure you are investing in retirement savings.

If your employer has a retirement savings plan that they match or pay into by all means find a way to get involved.

Don’t leave free money on the table.

As you get your debt paid off (not including the mortgage) you can allocate more money to your future.

Finally, stop blaming everyone else but yourself for the situation you are in and just own it and move on.

Discussion: What ways do you incorporate into your daily finances to improve your negative net worth?

Leave me your comments below and I’ll be sure to respond to you.

Net Worth Losses and Gains

January 2020

CBB Net Worth

What happened to our money in January?

Net Worth 2020 Overview

As for January of this year, the Net Worth was down mainly due to depreciation of the family vehicle.

Unlike homes, pretty much everything else loses value over time and there’s nothing I can do about it.

However, I will still look after the vehicle as much as I can to make it last as long as possible.

The investments and income we’re mediocre but still in the black.

Volatility in the markets doesn’t help the situation with the investments though.

After record-breaking highs in the markets followed by drops, the markets are exactly a sure thing right now.

Here are the final net worth numbers for 2019:

We had a bit of a rough January as you may have heard with serious health problems in the family.

Because of that, I was unable to publish a year to date net worth overview like I wanted to for our net worth.

In a nutshell, I think we had a pretty good year spending money, saving money and investing in our retirement savings accounts.

$1,059,162.35 start of January 2019 ending at $1,160,225.17= $101,062.82 increase in our net worth for 2019.

Understanding Net Worth

What Does Individual Net Worth Mean?

Net Worth is a snapshot of your financial health sort of like a picture or 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 due 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 rather understand why and move on.

If you would like to use our budget I offer a FREE downloadable budget which I created and 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 resources at Canadian Budget Binder to help you build your net worth.

Calculate Your Net Worth

Net Worth Tracking

Do you know how to calculate your own Net Worth?

We like to calculate our net worth every month so we know if we are still on track.

Some people calculate it yearly or quarterly but it’s up to you and how informed you want to stay.

Net Worth is only an estimate and not everyone uses the same type of figures to tally it up.

Some of you may not include vehicles like we do or leave out assets inside the home as we have.

You might be that person that believes that your house should be excluded.

It depends on what you want to calculate or what you can sell today and make money on for tomorrow.

Figuring out net worth is fairly easy as long as you know your numbers or monthly finances which means you need to do your homework.

Net Worth is simply adding up all your assets (what you own) then taking away your liabilities (what you owe) which will give you a net worth number.

Understanding your net worth will help you determine if you are on track meeting or beating your personal financial goals.

It doesn’t get any easier than that.

Determining Net Worth

How to Determine Net Worth?

Net Worth = Assets – Liabilities

Why not go ahead and calculate your own using our Free Money saving Tool Net worth Calculator (Canadian Budget Binder 2012)

Financial Numbers

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 our goals, not a means of comparison towards your own goals to others’ target goals.

We don’t care how much money others make or if they have a high net worth or if it is 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.

Not everyone has the same path in life.

Some of you may have had to start over like I did or go to school a second time and now have OSAP loans to pay back.

Others may have divorced, lost money in the stock market or other investments, suffered job loss, fell ill or injured on the job and so on but you can’t let that stop you from achieving your financial goals.

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.

Earn It, Save It, Invest It, Build It

Remember what I said, “It’s not about how much money you make, it’s how you save it”.

The only reason people accumulate wealth is that they know how to save or invest it wisely even if they did inherit money or win the lottery.

The smallest improvements should mean big strides in working towards 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 who have a negative attitude towards their financial situation.

I urge you to be optimistic and little by little with determination you too should see improvements if you want that to happen.

Canadian Budget Binder Net Worth Updates 2020

Click the links below to read our net worth updates for the year.

That’s all for this month’s net worth update but please check in the middle of March 2020 to see how we made out in February 2020 with our financial portfolio.

~Mr.CBB

 

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