Your net worth is your financial health
You need financial literacy. One of the most important things to do in order to grow financially is to know where you are now so that you can chart a course for where you want to go. You need to be aware of your financial health, and one of the ways you can check on it is by calculating your net worth.
Net worth is the value of everything you have, minus any debt. It includes money in your bank accounts, retirement accounts, investments, real estate holdings, personal property like cars and jewelry, and anything else that could be sold for cash. Determining your net worth helps you evaluate how well you’re doing financially by giving a snapshot of your current situation. It shows whether or not you’re getting closer to achieving your goals and allows you to calculate the rate at which you’re moving toward those goals.
This number is an important tool for financial health awareness because it can help guide your financial decisions when it comes time to make a big purchase like buying a house or getting married. You’ll know if your savings will be able to cover the costs or if they need some extra padding beforehand.
You make spending decisions every day
Every day you make financial decisions, even if you don’t realize it. You decide what you want to buy and how much money you want to spend on it, whether it’s a $5 cup of coffee or a $300 new pair of running shoes. You decide what things you need and how much they’re worth to you. And this is why you need financial literacy.
But the most important part of financial literacy isn’t just understanding how money works—it’s learning why what we do with money matters. When we understand the importance of our financial decisions in the context of their larger impact on our lives, we can grow our savings and get out of debt, we can avoid problems with credit and taxes, we can plan for retirement and investment vehicles, and we can be responsible for our own financial futures—no matter what age we are. The more we know about the way money works, the better equipped we are to be responsible for our own success and help others who may not have had the same advantages.
Everyone will need to manage money at some point in their life
Everyone will need to manage money at some point in their life. Whether it’s paying a bill, buying a house, or saving for retirement, managing your finances is an essential life skill that means you need financial literacy.
Do you have the knowledge and skills needed to make informed decisions about money and manage your finances? Many adults do not strive for this goal. Instead, they turn to friends and family or rely on their partner’s knowledge of the subject.
Some people are uncomfortable with the idea of financial education because they feel intimidated by math, they’re embarrassed by their level of financial literacy, or they simply don’t know where to start. But financial literacy is vital for everyone regardless of age or income level.
Financial education is not just about learning how to manage your money – it’s also about understanding how to use it as a tool to help you meet your life goals.
There’s a lot of financial literacy you can learn on your own
There’s a lot of financial literacy you can learn on your own. In fact, if you’re interested in learning about money and finance, there are plenty of resources available to help you get started.
The Federal Reserve offers some great basic advice on managing your personal finances with the goal of creating and maintaining a positive credit history. There are also plenty of great books out there that will introduce you to basic economic concepts, like how interest rates work and the importance of budgeting for saving.
One book I found particularly helpful was Rich Dad, Poor Dad by Robert Kyosaki:
And don’t forget about the wealth of free material online, including on YouTube. For example, one site that is particularly helpful is LearnVest, which helps users understand concepts related to investments, savings, and debt reduction. Many of these resources may be able to answer all the questions you have about money management—you just have to take advantage of them!
Learn With Friends: If you’re interested in learning more about personal finance, consider getting together with some friends who share similar goals for their future and have similar levels of experience with money management. You can set up a Facebook group or grab a few tables at your favorite coffee shop—it doesn’t matter where or how; just meeting regularly can help motivate everyone to stick with the group through the ups and downs of learning new concepts.