WH
Whitney Hansen
about 2 months ago

How to Calculate Your Net Worth and Why it Matters

money
adulting
Net worth is this concept that a lot of people seem to forget is important. I see far more attention on credit scores than I do on net worth. And I understand why. A sizable net worth takes years to accumulate.

While I’m a big fan of tracking your net worth, keep in mind, your net worth is not your self worth. You are an incredible human and jus...
Net worth is this concept that a lot of people seem to forget is important. I see far more attention on credit scores than I do on net worth. And I understand why. A sizable net worth takes years to accumulate.

While I’m a big fan of tracking your net worth, keep in mind, your net worth is not your self worth. You are an incredible human and just because you’re net worth isn’t where you want it to be, does not mean you are a crappy person. Don’t ever forget that! 

We all have very different journeys and the important piece is to use your past experiences (and the stories of other Nav.igators) as fuel for your bright future.

What is your net worth?

Your net worth is a snapshot of your personal situation at a moment in time. It might fluctuate, but the important thing is the overall number should be increasing over time. Net worth is composed of two categories: assets (things you own) and liabilities (things you owe).

Some people don’t consider a home an asset and some people do. Frankly, I don’t care if you do or don’t as long as you are consistent in your tracking. For example, if you own a home, the value of your home is considered an asset, but the loan amount needs to be a liability. Make sense?

Let’s break down some common assets.

The assets that most people come across are:
  • Homes
  • Cars
  • Cash in the bank
  • Investments
  • 401k, 403b, IRAs
  • Raw land
  • Rental Properties
  • Valuables around the house (any antiques, jewelry, equipment that is worth some cash, etc)
In a nutshell, it’s anything you own that is convertible to hard cash. Make sure you use market value or blue book value for items. 

For example, if you aren’t sure what your house is worth, you can have it appraised, look at comps, or use the value listed on your latest tax assessment. For your car, use Kelly Blue Book or Edmunds to see how much your car is truly worth. Investments provide you with monthly statements, so that should be fairly easy to locate.

The goal here is to be as definitive as you can by using the best numbers you can find. If your car is worth between $5,000-$7,500, use $5,000 for tracking purposes.

Let’s break down liabilities.

Liabilities are super easy for people to understand. It’s basically anything you owe money on.
Common liabilities that you might come across:
  • Student loan
  • Car loan
  • House loan
  • Credit card debt
  • Money you owe to your mom or dad
  • IRS debt

Any type of loan or anyone that is expecting payment from you should be included in your liabilities.

How to calculate your net worth.

Now that you have a better understanding of what numbers are included in your net worth, it’s time to figure out what your net worth is. You can get real nerdy and use a spreadsheet (my preferred method) or just jot down your assets and liabilities on a piece of paper.

Once you have everything written down, subtract your liabilities from your assets. That number is your net worth.

Let’s say you get into the numbers and your assets are $100,000 with liabilities of $150,000. Your net worth would be -$50,000. And for a lot of people just getting to net worth of zero is a really big deal.

Remember how I mentioned earlier your net worth is a snapshot in time and the overall trend line should be moving upward? For a lot of people calculating their net worth is a really important way to see if you are progressing.

I highly recommend updating your net worth on a monthly basis and looking at the trend line over the course of a year. Once a year, reassess the value of your assets and adjust as needed. Cars tend to depreciate fairly quickly, so the market value of your car will likely decrease each year. Just make sure you have that reflected in your calculations.

How do you know if you’re on track?

This is such a great question, and one that I hear all the time. While I don’t think you should compare yourself to other people, there are certain formulas that help you understand if you are financially where someone of your age and income ideally should be. Everyone starts at a different place, but this will give you a bit of context.

NET WORTH = [YOUR AGE – 25] X [GROSS INCOME/5]

If you are 28 years old making $55,000 before taxes then your target net worth at this stage is $33,000. (28-25=3) x ($55,000/5= $11,000).

This number might be way more than you have right now or way less than you have, but it’s a good target to see how you are doing.

If you want to increase your net worth.

It’s a two-sided equation and working on both sides makes a big difference. If you are feeling the pinch of having too much debt, then paying off your debt will directly impact your net worth in a positive way.

Additionally at some point, once you are debt-free, you have to start boosting your assets to grow your net worth. For example, I personally only have a mortgage on my liabilities, so each month that I make a house payment, I’m directly seeing this net worth amount grow. It’s super exciting! 

But I’m also at a point where boosting my assets makes a lot more sense. So I do my best to contribute more into my investments each month and am considering investing in rental property as soon as I save up enough money to do so.


AL
Athena Lent
2 months ago

Mutual Funds, Index Funds, ETFS, Oh My!

adulting
investing
I see you, girl. You want to travel, do brunch, and buy those shoes. But you also know you should be planning for the future.

You even know that your company offers a 401K. But it’s all so overwhelming. Obviously you’d rather spend your free time watching The Bachelor than plotting out your investments. 

I see you, girl. You want to travel, do brunch, and buy those shoes. But you also know you should be planning for the future.

You even know that your company offers a 401K. But it’s all so overwhelming. Obviously you’d rather spend your free time watching The Bachelor than plotting out your investments. 

I get it. Just remember that at the end of the day, the number one goal of investing is to make you money so you can accomplish all those #lifegoals. If that’s not a motivator, I don’t know what is.

Here’s how to get started (so you can get back to those red-bottomed Louboutins).

First, the basics. 

You make money off of investing when your portfolio is estimated to be at a higher value, or breaking even, with what’s currently going down in the market. There are three different vehicles you can use when investing: mutual funds, index funds, and exchange-traded funds (ETFs). All require you to own some mix of stocks and bonds. How you mimic or beat the performance of the market is dependent upon which vehicle you choose. 

A mutual fund is when you allow an investment firm to manage your portfolio, attempting to outperform the market. A portfolio manager (who’s hired by the investment firm) will purchase and trade stocks they think will perform exceptionally well in an effort to grow your investments. 

An index fund is a set of stocks purchased together that are set up to mimic the overall market return rate, known as a benchmark. When you purchase index funds through an investment firm, they still handle the purchasing and trading of your stocks, just less frequently. Think of this as a “set it and forget it” money move.

The last vehicle is called an exchange traded fund (ETF). ETFs are considered a type of index fund because the stocks are purchased as a set, but they’ve got one major difference. Instead of letting an investment firm handle the funds, you actively manage them yourself in a private brokerage account. Time to put on your big girl pants!

So. Much. Stuff. What’s the difference? 

Fees! Fees is probably the number one difference between all three. Since no one is actively managing them (except you!), index funds are considered the cheapest investing option. Mutual funds usually have a flat rate per amount invested, but ETFs have one every time you trade. This is really important because gains (what you earn) can be eaten up by fees when trading often with ETFs. Keep that in the back of your mind before you start your own production of The Wolf of Wall Street

Oh yeah, and…

There are also different levels of risk involved when trading. It’s not exactly Game of Thrones out here, but there’s definitely something to be said about the “win or die” complex with the stock market.

Index funds are historically safe, while mutual funds tend to perform higher. ETFs are considered the riskiest of the three because you’re taking sole responsibility for the picks. So, if you aren’t well versed in stock picking, it might be rough until you get the hang of it (like, lose your money rough). 

Hmmm, I’m still on the fence. 

That’s cool and all, but remember, the more time your investments have to grow, the better off you’ll be. 

When you feel ready, you have options. Check with your HR representative at work to see what your company offers in terms of a 401(k). Speaking to a certified financial planner is always a good choice. And as always, check out Nav.it for more tips on how to handle your cold hard cash. 


AB
Alma Bahman
3 months ago

Roll On Over to the Debt Snowball Method

adulting
debt
Paying down debt seems straightforward: you borrow, you pay back, you don’t owe anymore. Ha! If only it were that simple. The truth is, it’s all too easy to get behind in payments and watch the total amount you owe grow exponentially due to that pesky thing called interest. 

The proof?
Paying down debt seems straightforward: you borrow, you pay back, you don’t owe anymore. Ha! If only it were that simple. The truth is, it’s all too easy to get behind in payments and watch the total amount you owe grow exponentially due to that pesky thing called interest. 

The proof? The average American household owes $137,063 in debt (including mortgages). But fear not, Nav.igators: Having debt doesn’t mean a life sentence of eating only ramen and living in your mom’s basement. (Just take it from our friend, Whitney, who paid off her debt and celebrated in Hawaii.)

The snowball method will help you chip away at your debt little by little, building your financial momentum from a handful of flakes into a big beautiful snowman of fiscal responsibility. 

It’s less about the money and more about your mindset.

You might have heard of this debt-reduction technique from a guy named Dave Ramsey, a multi-hyphenate entrepreneur and author of several financial advice books (NBD). He’s made debt snowballing a cornerstone of his business helping people get out of debt. 

According to Ramsey, the true value in this method is the effect it has on your morale. “It’s designed to modify behavior,” Ramsey says. “It lights your fire. Once you get a few quick wins under your belt, you’ve got momentum!”

The process goes like this: Pay off your debts one at a time, from smallest to largest dollar amount, regardless of interest rate. After you eliminate the smallest debt, you apply the same amount of money you were putting toward that debt to the next highest one, and so forth. 

The more money you can put toward your payments, the quicker it goes. Just like a snowball rolling down a hill, you’ll build debt-busting momentum the faster you move.

Keep the ball rolling.

Debt snowballing is all about motivation, and while you might think that’s a little hippie woo-woo for you, it’s actually been scientifically proven to work. 

A 2016 study in the Journal of Consumer Research found that focusing on one debt at a time (instead of paying down multiple debts simultaneously) was more motivating to debtors, especially when they paid off small debts in quick succession (a.k.a. “snowballed”).

All you type-A’s who get exhilarated by checking items off your to-do list know exactly what this feeling is like. It’s all about the little victories.  

Is the snowball right for you right now?

Debt snowballing will work, but just like anything else with finance, it really depends on your current situation. “Some people eliminate debt faster than others, but everyone who sticks with it will get rid of debt,” Ramsey says.

Debt snowballing is just one of many strategies for paying off debt. So, it’s totally worth asking yourself if plowing through your debt is the best strategy for you. Are you more concerned with paying the least amount of interest possible? Or are you more concerned with building up savings first?

Answer that question and you’ll be on your way to strategizing your debt escape plan.


WH
Whitney Hansen
5 months ago

The Ultimate Guide to How I Paid Off 30,000 in 10 months

adulting
debt
2010 was a great year. I graduated college, I got my first “big kid” job at a public accounting firm and life was looking promising. There was only one problem. 

I had almost $30,000 in debt staring me in the face. 

For some, that is okay, student loans are normal. But I wanted to make my own choices instead of having debt make choices...
2010 was a great year. I graduated college, I got my first “big kid” job at a public accounting firm and life was looking promising. There was only one problem. 

I had almost $30,000 in debt staring me in the face. 

For some, that is okay, student loans are normal. But I wanted to make my own choices instead of having debt make choices for me. Intuitively I knew that $30k was a crap ton of debt. I couldn’t take a job at a non-profit (paid too little), and I couldn’t start my own business, because I had a debt to pay off. My paycheck was officially owned before I even got my hands on it.

Treating debt like a necessary part of your life will cost you. What are the costs, you ask? Well…
  • Thousands of dollars in interest
  • Hours of lost sleep
  • Stress levels that not even wine can cure and the most costly…
Your freedom. It took me years to figure out that debt was stifling my growth. I didn’t even know I had problem until it hit me in the face – rather abruptly too. Okay, let’s get down to business. This is exactly what I did to pay off $30k in 10 months.

Step 1: The Plan
In order to tackle the Goliath of a debt, I needed a plan. Something that was actionable, measurable, and ambitious. I also needed a pretty big shovel to fill the hole I dug myself in. 

I’ve always been a big believer in the saying…“If people aren’t laughing at your goals, you aren’t dreaming big enough.” My first goal was to pay off my debt in 12 months. When I shared this goal, I not only got some strange looks, laughs, and smirky smiles, but I was also told I set my bar too high.

Anytime you go about trying to achieve a massive and audacious goal, people will try to put your dreams down. Don’t let them. People project their version of the world onto you. If they don’t think it’s possible for them to personally accomplish the goal, they will tell you it won’t be possible for you to do it either.

On October 10, 2010 I wrote in a notebook: Pay off $30,000 by October 2011.

Thanks to the power of setting goals correctly (and a ton of grit), I actually beat my goal by two months. In August of 2011, I made my final student loan payment. That night, I slept like a baby.

Step 2: The Sacrifice
Part of my plan of paying off my debt was knowing that I had to make some really, really big changes. Cutting out buying coffee twice a week was not going to cut it. To get drastic results, I had to make drastic changes.

My pre-debt freedom situation:
  • Owned my own home
  • No car payments (thank baby Jesus!)
  • No credit card debt
  • Was in a serious relationship
  • College degree
  • $30,000 in debt
  • Great part-time job at a spa with extremely flexible hours
  • Landed a Staff Accountant position with a flexible schedule
 Here were the sacrifices I made:
  • Rented my home out for $100 per month more than my house payment & moved in with my partner (allowing me to pay lower rent)
  • Sold all my awesome furniture (this was a bummer-dude moment for me, but gave me a nice chunk of cash to start my debt-free process)
  • Worked two jobs, 70-80 hours per week
  • Didn’t have a day off for three months
  • Didn’t buy coffee for 10 months (I almost forgot what the inside of Starbucks looked like)
  • Packed a lunch every single day (to this day, I still bring a lunch every day)
And probably the most important sacrifice…my lifestyle. I knew I could survive on less than $25,000 a year. Heck, I knew with my house rented out I could survive on $15,000 a year. I lived in true “college student spirit” a little while longer. 

The two shovels that I used to fill the large “debt” hole:
  • Spa job: This was my job that put me through college. I lived on a solely commission-based income for 4 years and knew I could continue living off of it. Working part-time at the salon meant that my income would decrease to around $25,000 a year. I worked 26 hours a week and made 100 percent commission.
  • Accounting job: Accounting is very cyclical business. I was deeply needed for audits and preparing tax returns. I worked at the accounting firm 49 hours per week, and was paid once a month. This check went ENTIRELY to paying for my debt.
Have you ever been so busy that you literally couldn’t even make it to the bank, let alone go shopping? That was my life. Being so busy was a huge blessing in disguise. I didn’t even have time to spend money if I wanted to. My sacrifices were drastic (but passive streams of income can be game-changers).

I wanted unreal results, and I got them. It wouldn’t be fair if I didn’t discuss the financial tools I used to make this happen.

Next week, we’ll share how these and the perks of living debt free in the Ultimate Guide for How I Paid Off 30,000 in 10 months, Part 2. If you're interested in connecting with Whitney Hansen for one-on-one coaching, reach out here.
LA
Liz Alterman
5 months ago

How to Ask for (and Get) the Raise You Deserve

adulting
salary
Talking about money — especially when it comes to asking for more of it —makes many of us feel, well, awkward. But that’s no reason not to request the amount you deserve.

According to a study by the Cass Business School, the University of Warwick, and the ...
Talking about money — especially when it comes to asking for more of it —makes many of us feel, well, awkward. But that’s no reason not to request the amount you deserve.

According to a study by the Cass Business School, the University of Warwick, and the University of Wisconsin, women ask for raises just as frequently as men do. Unfortunately, the study found that while women aren’t shy about asking for a raise, historically, they’ve been 25 percent less likely than their male counterparts to receive it.

But don’t let that information discourage you. Let it empower you to strengthen your resolve to change those statistics.

“Asking for a raise is tough on any employee, especially women in the workplace,” says Neale Godfrey, president and chairman at Green$treet Commons, Inc. “That said, women have made incredible strides and a women's voice in corporate America is louder than ever.”

Let’s take our volume and fearlessness to a new level, ladies. As the new year and review season roll around, it’s vital to build an iron-clad case that proves you merit this bump in pay. Here’s your roadmap to asking for — and getting — the raise you deserve.

Know your worth
While it’s tempting to request a pay hike that would take your lifestyle to a whole new level of fabulous, it’s important to be realistic. When it comes to making an ask that will be considered, you need to understand where your salary falls in relation to others with your title in the same industry.

“The first step is to do your homework and determine what the current market rates are for your position,” says Amanda Haddaway, managing director and lead consultant and trainer for HR Answerbox. “Check out websites like the Bureau of Labor Statistics, Glassdoor, and other online pay sites. Keep in mind that some of this data is user-submitted, so it may not be 100 percent accurate, but it can at least give you a ballpark of what others are being paid for similar jobs in your area."

Pay attention to your role and level when doing this comparative research, says Adam R. Calli, principal consultant at Arc Human Capital, LLC. “Be sure it’s matched to your hierarchical level, your duties and responsibilities, your performance, and your geography.”

Show your value
Once you’ve determined that magic number, you’ll want to go into your review or meeting armed with evidence that illustrates exactly why you deserve that boost.

“Be prepared to talk about your accomplishments and have concrete examples,” says Jody Friend, president and CEO of JLM HR Consulting, LLC.

Calli recommends considering the following while building your case: 
  1. What are the key performance indicators that are monitored in your company or your division? “If you can tie your work to positive benefits for the organization, then you are putting down a strong foundation to justify an increase,” he says.
  2. What happened during the past year or so that was unusual and required unusual effort on your part? “Reminding the boss of how you stepped up during particularly trying times is an important part of your argument,” Calli points out. Think of things like going above and beyond while short-staffed, rolling out a new system, and meeting new client demands.
  3. Did you save the company money? If so, bring out the receipts. Data is your friend.
  4. Did you take on any new responsibilities? Flip through your calendar and look at everything that was scheduled this year to jog your memory, Calli suggests. Did you prove your worth by managing a bigger team? Go above and beyond to take on tasks you weren’t hired to do? Train a large number of staff or teach your colleagues something important? Take on extra travel that usually isn’t required?
  5. Did you earn a certification that makes you more valuable (not to mention more marketable!)?

Practice makes perfect
It’s completely understandable to feel nervous about making the request— all the more reason to workshop it.

“Role play the conversation,” suggests Godfrey. “It might be awkward to rehearse your negotiation, but preparation is key. Find a friend or family member and record the discussion.”

Time it just right
Be mindful of when might be an opportune moment. Choose the right time for “the conversation,” Godfrey advises. 

“Schedule it, and be cognizant of what is happening at work. Before a big deadline or the week before your boss is going on vacation may not set the best stage for a raise discussion."

Get creative with your requests
While, of course, everyone hopes this request will go his or her way, if you don’t receive a resounding, “Yes!” initially, take heart: all is not lost.

"Companies are hesitant to make a longtime increased salary commitment, but might be happy to recognize and reward you for a job well done,” Calli says. 

Perhaps there’s something other than cold hard cash that would make you feel more appreciated. “What is valuable to you besides only money?” Calli asks. “Maybe an extra week of vacation as a bonus? What if they pay for your parking for the year? To the company, paying for parking is a very different thing than more payroll dollars. So be creative and have a plan B of what you’ll ask for if the salary-increase request is turned down.” 

Remember the old saying, “You don’t ask, you don’t get?” Well, you’ve got this. And you’ve earned it!


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