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RBC Financial Planning - Tips on Budgeting and Borrowing

Increase Your Net Worth

 

Strategies to help

How are you doing financially? Are you accumulating wealth at a quick enough pace? Are you making progress toward achieving your financial goals? A good indicator is your net worth. Keeping track of your net worth on a regular basis is an effective yardstick to measure your progress.

To calculate your net worth just add up your assets and your liabilities. Then subtract the total liabilities from the total assets. What is left is your net worth.

Your assets are what you own or are buying over time - cash, savings and checking accounts, real estate, investments, household goods, as well as the cash value of pension plans and insurance policies. Your liabilities are what you owe - mortgages, loans, credit card debt, dental bills, car payments and other debts not yet paid in full.

If your net worth is positive - your assets are larger than your liabilities – you’re heading in the right direction. If not, you have some serious work to do. You have to sit down and analyze your financial life. And then you have to take control of it. You have to decide if you’re running the show or is it running you.

The first thing you can do is look this list over and see if you’re guilty of any of these bad financial habits? Are you doing things like:

  • Spending more money than you’re earning
  • Spending money on unnecessary things
  • Not knowing where your money is going
  • Treating luxuries as necessities that you must have
  • Carrying balances on high-interest credit cards
  • Making financial decisions based on emotion
  • Making investments based on tips and hearsay
  • Investing your money without proper research
  • Not considering the after-tax returns of your investments
  • Making important financial decisions without proper research
  • Going into debt for the wrong kinds of things
  • Not having funds set aside for emergencies
  • Procrastinating on important decisions
  • Not making certain decisions at all
  • Not taking advantage of your RRSP benefits (Every $1,000 invested in your RSP can generate a $400-$500 tax savings if you’re in the top tax bracket)

If you’re like most people, there are likely one or two or even three of these bad habits that you are indeed guilty of. But much more than that and you’re simply not going to be accumulating wealth anywhere near as quickly as you might. Even worse, you could be heading for serious financial difficulty.

On the other hand . . .

Accumulating money isn’t everything. Life has many other rewards and pleasures that have nothing to do with money. Family, friends, activities you enjoy, causes you support – all have to be balanced against money.

That old tired and worn cliche still rings loud and clear, even though you’ve heard it a million times: “the best things in life are free”. But at the end of the day, most of the other things aren’t free, so although perspective must be kept, a certain amount of wealth must still be accumulated.

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 İRoyal Bank of Canada 1995-2017 Last modified: 09/24/2014 09:40:34