Now that you have taken the time to calculate your net worth – how do you feel? I wanted to hide under the covers and pretend nothing ever happened… but we are going to get through this, fear not!
Let’s talk about what it all means.
If your net worth is positive, congrats! You are in the red (or as I like to think of it, the pink, with glitter… and maybe a vacation or two… but wait… I’m getting ahead of myself). A positive net worth means you have more money/valuable assets than you have debts… you get a gold star.
If your net worth is negative… don’t cry, don’t stomp your feet and say it isn’t fair (I did these things… a few different times). We are going to fix it, together. A negative number means that you have more debt than you have money/valuable assets… and frankly, this is not surprising! The average recent college graduate has approximately $30,000 in student loans outstanding… and that is just for undergrads – postgraduate degrees tack on tons and tons more debt (I am looking at all you MAs, PhDs, MBAs and JDs out there – mo’ money, mo’ problems). If you google student loan statistics, your head will explode from all of the scary stats – so don’t – just take my word for it.
If student loans and/or credit card debt are the major causes in your negative net worth – don’t worry your pretty little head too much… we address student loans here and credit card debt here in great detail. When it comes down to it – student loans are usually the lesser of two evils because the interest rates are typically lower than the interest rates for credit cards. I use the words usually and typically – for greater insight into the scary world of credit card interest rates – click here.
If a mortgage is the major cause in your negative net worth – did you include the value of your property in your assets calculation? You should! Your mortgage should not negatively impact your overall net worth unless there has been a severe drop in the value of the property since you purchased it.
You’re on your way! By looking at your net worth, you are seeing a glimpse into your financial wellness. You are now able to evaluate whether you are healthy and on the right track, keeping fit and taking good care of yourself, or if you are a tad under the weather and working your way out of a pretty big hole (for better or for worse). I was most definitely in the latter category for my entire adult life (thanks for nothing, a*hole credit card offers from 2004)… until two weeks ago – when I finally made it into the sparkly pink!
Next, we will take another big step in evaluating your financial health – taking a long, hard look at your income and expenses.
Sincerely yours in harmonious fun and fiscal responsibility,