Sunday, May 1, 2011

The Quickest Way to Significantly Increase Your Net Worth

The Quickest Way to Significantly Increase Your Net WorthYour net worth equals what you own minus what you owe. It is commonly referred to as the difference between your total assets and your total liabilities.

Here's a simple illustration:

Home Value = $350,000 Mortgage balance = $150,000

Investments = 100,000 Credit cards = 20,000

Auto = 45,000 Auto loans = 30,000

Savings = 15,000 Bank loan = 4,000

You Own = $510,000 You Owe = $204,000

Therefore, your net worth would be $306,000.

There are two ways to increase your net worth. You can own more things or you can reduce your debt obligation. This article will focus on reducing your debt first because it is the fastest way to generate more money and, then, buy (own) more things.

In our example, you have $204,000 of debt. If you're like most people, you pay less attention to the mortgage and car loan balances because you consider them to be rather normal (necessary) to your way of life.

The credit card companies are probably charging somewhere between 12 to 18 percent (forget those slick, short-lived introductory teasers) and the bank loan is probably around 6 percent.

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