Net worth is defined as your assets – such as cash, investments and property – minus your liabilities and debts. In other words, it's how much you own versus how much you owe. Net worth is the main metric personal finance experts like to use when measuring their financial picture from month to month and year to year, and to no surprise, the goal is usually "higher."
If you've just bought a house or are paying off student loan debts, your net worth is likely a negative number. Which is normal. The most important thing isn't the number itself, but how it grows over time. And you can make moves every month – even to the tune of just $50 or $100 – to move the needle back to black.
Know Your Net Worth
Step one is to actually calculate your net worth. A service like Mint is great for this; you can input your cash, investments and debts and it spits out your net worth figure. But you can do it the old-fashioned way, too. Here's a little briefer from Learnvest on how it's done:
Start by tallying up the value of everything you own: any cash in checking and savings accounts, the balance on brokerage and retirement accounts—and big-ticket assets like real estate, cars and jewelry. Then take that figure and subtract all of the money you owe, such as credit card debt, student loans and your mortgage.
Once you know your number, you can track it. Take a few months to monitor your current situation, then start to move onto strategies that move the needle in a positive direction.
Cut Out (or Shrink) Some Expenses
The cash portion of the net worth calculator is the easiest to affect in your everyday life. Every $20 you can avoid spending each month will stay tacked on to your net worth number.. Even small savings like cutting out a luxury or negotiating to have a bill reduced can really multiply over time.
Find Ways to Make More Money
Personal finance folks like to call this a "side hustle," and it's the other side of the coin to cutting expenses above: Find ways to make money aside from your regular income. Jullien Gordon has put together a great list of 50+ side hustle ideas to get your juices flowing on new ways to make your talent, time and energy work for you.
Double Down on Paying Your Debt
In terms of effort, paying more towards your existing debts is a simple way to seriously accelerate growing your net worth. Pay double the minimum payments on credit card bills, or budget an extra $100 to pay down the principal on your mortgage or student loans each month.
Max Out Your Retirement Contributions
If your company offers a 401K match, you should absolutely be doing everything you can to earn the entire matching amount. That is, if your employer will match 50% of your contributions for the first 6% of your salary, you need to be contributing the full 6%. It's like having somebody else pad your net worth for you.