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Day 26: Recession-Proof Your Finances

Apr 10th, 2020 • Jasmin Snyder

Today we are covering net worth. Net worth is a simple calculation that helps you see (theoretically) what the total value of cash you could have if you sold everything you own (minus what you owe). Here is Pete explaining all that in more detail:

Net Worth

To put it plainly, your net worth is your assets minus your liabilities. That’s it, that’s the calculation. This will either be a positive or negative number. While a negative number isn’t ideal, what we are looking for here is hard data. You have to know your net worth to ever know if you’re improving it.

No one wants the last month to have existed so for the sake of this calculation and your sanity, use your January investment statements. Then you can set a reminder to calculate your net worth again in 6-12 months from then.

Assets

  • Value of home (what you could sell it for)
  • Savings balances
  • Investment balances (529, 401k, etc.)
  • Some people include the value of jewelry, collectables, or antique cars in their net worth. Pete’s rule of thumb is if you aren’t planning to sell it, don’t include it in your asset list.
  • Don’t include vehicles

Liabilities

  • Mortgage (total, not payment)
  • Student loans (total, not payment)
  • Other debt totals: medical, consumer, 401k loans, loans from family/friends, etc.
  • Don’t include vehicle debt (unless it’s a collectible and you’ve included it above)

Add up totals for both sides and subtract them. This is your net worth. You are looking for positive growth as you calculate your net worth every 6-12 months. Don’t be too disheartened if you have a negative net worth. Looking at the data gives you a place to begin. Getting “less negative” over time is a positive thing!

How to grow your net worth

  • Adding to your saving and investing accounts (529 contributions, saving into your emergency fund, 401k/IRA contributions)
  • Investment growth (it will happen again someday)
  • Paying down your debt

Don’t forget to check out the Power Percentage┬« lesson we did just a few days ago. Power Percentage┬« is similar to net worth but is a better indicator of how you are doing financially.

For more personalized guidance don’t forget that a Hey Money expert is always ready and waiting to help you sort out this mess. Use code ‘cheese’ to get a 10% discount on a monthly subscription just for being a part of the 30 day recession-proof your life program. Stay strong!

These live streams are still going strong and we still have a lot of ground to cover. To catch the live broadcasts like the Hey Money Facebook page to be alerted when Pete goes live at 2:00 pm EST daily.

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