How to Do a Net Worth Audit (And Why It’ll Motivate You)

Transcript:

On this episode of the Personal Finance Podcast, how to do a net worth audit and why it'll change your life.

What's up everybody, and welcome to the. Personal Finance podcast. I'm your host Andrew, founder of Master money.co, and today on the Personal Finance Podcast we're gonna talk about why you should do a net worth audit and why it'll change your life. If you guys have any questions, make sure you join that Master Money newsletter by going to.

Master money.co/newsletter. And don't forget to follow us on Spotify, apple Podcast, YouTube, or whatever podcast player you love listening to this podcast on. And if you wanna hop out the show, consider leaving a five star rating and review on Apple Podcast, Spotify, or your favorite podcast player. Now, today we're gonna be diving into how to do a net worth audit, and I'm gonna teach you how to increase your net worth dramatically over the course of the next.

12 months. See, most people think that they need a budget to turn their finances around, but that's not necessarily true. What they really need is to learn how to do a net worth audit and then develop a system and put this system into place that is going to help you increase your net worth over time.

Because here's the crazy thing, you can budget for 20 years and never build wealth because you're focusing on the wrong things. If you're not looking at the scorecard, which is your net worth, this is what's gonna make the dramatic changes in your financial life. Really wealthy people are the folks who are actually monitoring their net worth.

Not just their income, not just their savings rate, but really what direction is your net worth going in, and why is it so important? Because your net worth is the truth. It's your financial scorecard. It tells you are you winning the game or are you losing the game? Now, today I'm gonna show you exactly how to run net worth and how to audit it step by step so that you are not confused whatsoever.

And then I'm gonna show you the exact moves that you need to make over the course of the next year to make sure that this time next year you have a net worth that is way higher than it currently is. We'll break down what a net worth audit is, why it is the single best metric for you to be tracking.

We'll talk about exactly how to do it step by step. You don't have to worry. I'm gonna give you some of the tools where you can track your net worth automatically. But in addition, if you wanna do it on a spreadsheet, you can absolutely do that as well. I'm gonna talk about the major mistakes people make when they're calculating their net worth.

I'm gonna talk about what to do with the results and the high leverage activities that you need to take action on so that you can increase your net worth. So this is an action packed episode, so if that's something you're into, let's get into it. So first, let's talk about a net worth audit. What actually is a net worth audit?

And why should you actually be considering doing this? So your net worth is your assets minus your liabilities, and whatever that number comes out to be, that is where you stand, and that is what your net worth is. Now, a net worth audit is just a sh. Structured way for you to look at your net worth in a very strategic manner, meaning we are gonna go through our network and actually strategize how are we gonna increase this thing?

What a lot of people do is they track their net worth and they say, oh, that's nice. A number got a little bit higher this year. But instead, if you get real strategic about this number, you can build a tremendous amount of wealth. Just by being intentional. Intention is the name of the game when it comes to the big numbers.

Now, you may have heard me talk about this in the past. Some of the biggest numbers that you need to be tracking out there are your savings rates, your net worth, how much income you have coming in, in addition to how much debt you have, and where your net worth stands. And so today we're gonna be diving deeper into this.

We're gonna list every asset. We're gonna look at your debts. We're gonna calculate the difference and we're gonna start to do comparisons quarter after quarter, month after month. Now, for most people, they like to track their net worth once every single year, and that is absolutely fantastic. But if you are in the phase where you are trying to get out of a negative net worth, or you're trying to accelerate your path to wealth, then tracking your net worth a little more frequently could be beneficial as well.

And one of the cool things that you can do is you can begin to spot trends and make adjustments. And so because we can spot these trends, we can say, Hey, some of this stuff is not working for me and I wanna make an adjustment, or I wanna spot this trend so I can make a move. It is the single biggest indicator of how well you are doing financially.

It's not your income. It's not your expenses, it's not your budget. It is your net worth because if that number is ticking up and you're seeing your assets grow exponentially, that is gonna have a dramatic impact on your long-term wealth building. And here's the big secret. People who track their net worth, they grow wealth faster.

Why do they grow wealth faster? Because they're tracking the right things. They're not worried about the things that don't matter as much. They're instead tracking the right things that truly are gonna make a big impact on their wealth. Now, you may be saying to yourself, well, I'm not convinced yet. Why do I need to be tracking my net worth?

Why is this so incredibly important? Well, I'm gonna tell you exactly why this is so important and why it is the number one metric that you need to be tracking. Number one is it forces clarity. There is no vague considerations or wondering, am I on track or am I making progress with my money? No. Your net worth is gonna tell you exactly what is going on.

You see the. Actual math of your true assets minus your liabilities. Let me give you an example of how clear this can make it. Let's say for example, you have a hundred thousand dollars net worth. You have a full a hundred thousand dollars net worth, and you decide to yourself, Hey, I'm gonna go out and buy myself a brand new car.

I'm gonna take on an $800 car payment, and I'm gonna go buy a brand new car. And when I do this, I'm gonna see what the impact is. And so you go out and buy a brand new car for $40,000. Guess what's gonna happen if you finance that entire car? If you finance $40,000, your net worth will drop 40% down to $60,000, and this shows the true impact of your decisions.

Every single decision that you make is going to have an impact on your net worth, no matter how small or how big that decision is. Number two is your net worth is going to expose problems. Instantly, a lot of folks out there have issues when it comes to your finances. Maybe your debt is creeping up and if your debt is creeping up over time, you may be seeing that number or your net worth increase, shrink, or it's going backwards, meaning you're falling backwards and going negative, just like in our car example.

Secondly, as you could see, cash thinning out. If you are spinning a lot more cash than you need to be. Overspending in a specific category, you could see your cash start to thin out and it could cause problems within your finances. Number three is your investments are not moving, and if you have an investment portfolio put into place and you go back over the course of the last couple of years and it's not growing as fast as.

It should be. That is gonna give you a big indicator and your net worth is gonna have a big indication. Also, one thing I wanna note, and I'm gonna talk about this a lot in this episode, is one reason why your net worth could be going down is if the market is having a rough time. Let's say you're in a rough patch in the markets and the market takes a dip, well, that could have a big impact on your net worth.

And if that stuff. Bothers you, then maybe tracking your net worth on a monthly basis or a more frequent basis is not best for you. The psychology behind your net worth is also a very important thing, and so for folks who actually get emotional when they see their net worth go down, it is worth it for you to track it less frequently because the less frequent you track it, the less the market is going to dictate what direction that net worth is going to be.

But another thing that you would be able to figure out and expose these problems instantly. Big expenses are draining you for a lot of folks out there. Maybe you took on a mortgage that was too big for your britches, or maybe you took on some sort of car payment that was way too big. If those expenses are draining you, it can allow you to make educated decisions with your finances that makes you move the needle in different directions.

So doing a net worth audit becomes. Obvious when something is off. Now number three is what your net worth does, and this is a big thing for me. Boy, I love this. Part of your net worth is it builds up motivation. I get motivated when I look at my net worth. Sometimes if it gets cut back or goes backwards in any way, shape or form, I get ticked off and I'm ready to go after it again.

I'm ready to grow that net worth to make sure it is going in the right. Direction, and you should feel the same way. Maybe you're thinking to yourself right now, man, I have a negative net worth. I am in debt. I have credit card debt, or I have student loans and I don't really have many assets saved up at this point in time.

This is something where I'm gonna turn this entire situation around and you know what I'm gonna do? I'm gonna pay off this debt. I'm gonna start investing my money so my money can grow for me. I know that my dollars can work so much harder than I ever could, and this is a great reason to start tracking your net worth because it's gonna help.

Motivates you. When you see it grow, even by 200 bucks, 400 bucks, it is gonna start to motivate you. And once you start to see those big net worth chunks change, it is a huge, huge difference maker. Now, this is something we talk about when it comes to saving up your first a hundred K. We started to talk about saving your first a hundred K back in 2020 is when we did our first episode on talking about this.

And when we started to talk about it, all of a sudden we see other people starting to bring it up as well. Now, one big thing I want you to note. Is saving your first a hundred K is one of the most important milestones you can get to. Why? Because your net worth is gonna grow dramatically after that timeframe.

So for example, let's say you have a hundred thousand dollars invested. Well, if you get a 10% rate of return on that, a hundred thousand dollars invested, guess what? Next year you're gonna have $110,000 within your net worth. But let's say you have a million dollars invested. Well, if you get a 10% rate of return.

Every single year on that million dollars, guess what you're gonna making a hundred thousand dollars increased to your net worth and your bottom line. That is the big power of making sure you get more money invested is you're gonna see a big, big difference. And when you get to your first million, your first 5 million, your first 10 million, I wanna see all of you become multimillionaires.

And that's part of the goal of this podcast is we wanna create a million millionaires. But once you get to that first million and you start to see it grow, it is amazing how much faster it can grow because of that. Now, number four, one big thing that. Net worth also does is beyond motivation. It creates accountability.

You must be accountable to the number because that number is the real math of what's going on in your financial situation. You could be making tons of money. You could have a super high income, but you, if you don't have a high net worth, that money is just getting thrown out the window. You are literally draining all the hard work you are doing if your net worth is not growing.

And so this is where we wanna make sure that we are keeping ourselves accountable to the real numbers that actually matter. There's a lot of people in this world, there's a lot of people in this country who are making a lot of money, and guess what? There most of them are not actually utilizing those dollars for the right things, and we wanna make sure that we are doing that Also.

Number five is. Every wealthy person I know they do this religiously. They have their routine and they have their net worth audit routine where they are tracking this stuff. So they are going through this and they don't just track their budgets, they don't just track only their assets and not thinking about their liabilities, and they're trying to get all their wins, but they're not thinking about the losses that they have.

Instead, they are tracking their net worth religiously and making sure that they adjust accordingly. The goal is to win at wealth building and this is the number that you wanna make sure that you have in place that is going to help you. Do that now. In this episode, I am going to give you a step-by-step checklist on exactly how to do a net worth audit, and I'm gonna show you exactly how to do this net worth audit that every millionaire that I know and every really wealthy person that I know does.

We're gonna go through the net worth audit checklist, and I'm gonna also give you a bunch of tools on how. Set this up so you can do it automatically. Automating your finances is a big thing here at the Personal Finance Podcast and Master Money, and we wanna make sure that you know exactly how to do this automatically and you know which tools to use when you set this up automatically.

So really, really important to note that. And so we're gonna get into that right after this break. If you wanna finally master your money and build wealth with confidence, then you're going to love a Master Money Academy. This is the membership that I created to give you a step-by-step roadmap to get your financial life completely organized and working for you.

So inside Master Money Academy, you're gonna get the full roadmap that takes you from zero to financial independence. Plus video lessons, worksheets, calculators, deep dive trainings, in addition to weekly coaching calls with me, you're gonna learn how to automate your money, invest long term, negotiate your salary with no guesswork or overwhelm, and you'll get access to our private community of wealth builders where you can ask questions, get clarity, and surround yourself with other people who are building wealth.

One of my favorite parts about Master Money Academy is we have these things called Master Money Masterminds, where it's people who get together, who are working on a common goal. They help support each other and they help learn from each other. So if you've been wanting a simple system, a clear plan and support from a community that actually cares.

Join us inside Master Money Academy. Click the link below to get started at Master Money Academy and I can't wait to meet you inside. Alright, so step one to setting up your net worth audit is to list all of your assets. And so listing all your assets is first starting out with things like. Cash. So cash could be things in your checking account, money that you have in your high yield savings account, money that you have in CDs, any cash on hand that you have set aside, this is going to be a place where you're gonna list out that cash.

In addition, we're gonna list out investments. So your 401k your. IRA, your HSA, your taxable brokerage account, your Roth IRA, uh, bonds, index funds, cryptocurrencies. No matter what you have, when it comes to investments, you wanna make sure that you list all of those out and you wanna add it up. I don't care if you have $500 at some random brokerage somewhere where you have 200 bucks somewhere that your grandpa gave you a long time ago.

You wanna make sure that you list all of those different cash items so that you can have an accurate depiction of where your net worth stands. Then we wanna think about real estate. Let's talk about real estate for a second, because if you have rental properties, obviously we're gonna add those in, and if you have land, you can add that in as well.

But one big thing I wanna talk about is your personal residence. Now, your personal residence is a fantastic asset, and most Americans out there hold a big portion of their net worth in their house. If a big portion of your net worth is in your house, but a very small portion is in assets, things like rental properties or index funds or all these other things, then we wanna make sure that we flip that equation.

I am never comfortable when too much of my net worth is all equity in my house. And now a lot of you may have bought homes over the course of the last decade, and if you have, you probably have some great appreciation in there. And it could be a big chunk of your net worth. You might have a nice little net worth, but a lot of it is in your home's Value.

And so we wanna make sure that we flip the script on this and ensure that we have more assets building up over time, because those are what are gonna help us retire. Now, your home is absolutely an asset. I'm not gonna argue against that, but it is something where you don't want the majority of your net worth to be in your home.

And it's something that if you're just starting out, you know, it may happen. It may happen where you had some good appreciation, you maybe had a little bit of luck in the market, and so your home has appreciated a lot, and so you have your, a big portion of your net worth in your home, but let's focus on trying to get our assets up over time.

Now, how do you value your home? Do you look at the estimates? You can do that, and that's something where like if you use a tool like Monarch Money, for example. They actually allow you to hook up Zillow in Monarch money to your net worth statement so that you can get an accurate depiction and it's gonna move and fluctuate based on whatever the Zillow estimate is.

Now, obviously Zillow's not that accurate, and if you want a real accurate depiction of what your home value should be, there's a couple of things that you can do. You can slowly move it up based on the price that you paid. So if there's been a lot of appreciation. Being conservative over time is really important.

Number two is you can look at the assessed value. So the tax appraiser or the property appraisers are gonna be much slower to move up the home value than would be a estimate, for example. So they're gonna be slower to move up the exact value of your home because they're typically trying to be as conservative as possible.

And so you can use that value. If you don't know how to find that number, you can just go to your property appraiser's website. And if it's county, it could be city. It depends on where you live. But find your property appraiser's, website, mine for specifically where I am in Florida, is in county. And then you can go look up your home's assessed value and see where they have that number.

That's a very conservative number that can help you, not overinflate based on the home. Because if you overinflate your home and then the market pulls back, which homes don't go up forever, news flash. And so if the market does pull back, that's going to allow you to ensure that you're just not over inflating your net worth.

And then you have to have a negative year because the market pulled your home back. So. Four. So that's how I would think about your home. Now, if you wanna be extra extremely conservative, you could just utilize the number that you bought the home for. That'd be another place that is really conservative.

But you can absolutely do that. Again, Monarch Money uses, uh, Zillow and his estimate, and they link that up. That way you can do that if you want to. Nothing wrong with that whatsoever. Just being, just note that, you know, if the market does pull back the housing market, then you would just have to. Kind of adjust your net worth accordingly.

So that's another thing that I want you to think about as we go through this. So it is very important to also think through some of your other assets. So you can think of things like cars, if you have precious metal, if you own gold or silver, if you own collectibles, maybe you own some expensive sports cards or Pokemon cards.

I just read an article by the way, that Pokemon cards are out. Pacing the s and p 500. It's a crazy metric, but there are some valuable things out there like sports cards, like Pokemon cards. I've seen Michael Jordan cards going for over a hundred grand as of late. I've seen Tom Brady rookie cards going for over a hundred grand as of late, so a lot of crazy things that are there.

There can also be cash value if you have life insurance. Don't like cash value life insurance whatsoever. So if that is something that you do have, uh, I do not recommend it, but that is something that you could have, uh, within your net worth numbers. And I want you to use conservative numbers when you do this.

I don't want you to try to overinflate your net worth. No. We wanna make sure that we are conservative with this because if there is some adjustments. We wanna make sure that it does not impact our net worth too much and cause us to fall back. Now, one thing I wanna say is that if you use some of these automated tools that we'll talk about, Monarch Money is a great one.

Another one that we'll link up down below is Personal Capital. That is a free net worth tool that you can use that helps you track your net worth over time. Uh. That's a great one I've been using for over a decade. Personal Capital is one that, uh, is also fantastic. So you can use either one of those tools.

Monarch Money is just included in your budgeting subscription. Uh, if you use code PFP, you get 50% off of Monarch money over the course of the next year for 12 months. So it's a really, really good deal and a lot of people will use that link. A lot of people in Master Money Academy, for example, have used that link for Monarch money, and when they do that.

They're just shocked at how cheap Monarch money is when you get the 50% off code. So use code PFP, uh, at the time recording this that is good for 50% off your membership at Monarch Money if you want to utilize a automated tool. Now, the automated tools are great for a number of reasons, one of which is you don't have to keep going back into a spreadsheet over and over again.

But you can use a spreadsheet too if you want to. Uh, nothing wrong with that whatsoever. Some people like updating their net worth manually, and I don't blame you 'cause I think it is. Something that you could, uh, stay more on top of it if you do update it manually, but I like personal capital, Monarch money and or you can utilize a spreadsheet.

Now let's talk about liabilities. So next we are going to list our liabilities. And the most common liabilities for most people is their mortgage balance. That's gonna be the big. Big difference between, uh, how much liabilities that you have on hand. So your home is going to have a specific value and you're gonna subtract the liability, which is your mortgage balance from that home.

So let's say for example, you bought a home for $400,000 in 2020 and it has gone up being worth $800,000 of the course of the last five years, but you still have a $300,000 mortgage. On that home. That means you're gonna have $500,000 worth of equity that is going to go towards your net worth, but you're gonna have to subtract out that mortgage.

That's one of your liabilities. In addition, we have car loans. Car loans are gonna be another liability that a lot of people are gonna have, and that's gonna pull your net worth back. Another big one, especially for millennials, gen Z. Is going to be student loans where student loans are prevalent and they are heavy hitters for a lot of folks right now, it is one area where a lot of people are struggling, and so it's gonna be big in 2026 to make sure that we have a plan put together with all the new rules surrounding student loans to get those paid off.

But that's another thing we wanna have on there. Credit card balances. This is one where this is gonna be high interest debt. We want you to pay this off as fast as you possibly can. That is gonna be a great area to help increase. Your net worth is getting credit card balances paid off. Uh, we also wanna include personal loans, things like Klarna, buy now, pay later, all those different things.

And that number is growing. Uh, we wanna make sure that we get that done. HELOCs Business Loans, any other loans that you have, uh, medical debt, those would all be part of your liabilities. Anything that you are. Borrowing money that is part of your liabilities, and this is where a lot of people are having issues.

Now then what we're gonna do is we're gonna take your assets minus your liabilities, and a lot of the automated tools will do all of this for you. They'll ask you about your liabilities, what loans you have. You can even connect your loans to these automated tools, and they're going to allow you to, hey.

Your net worth is gonna go up or down based on you paying down that debt. And then we are gonna figure out where our net worth stands. Now for some of you, it could be positive. You may have a really strong net worth. We have people who listen to this podcast with tens of millions of dollars in net worth.

We have people who listen to this podcast with hundreds of thousands of dollars in net worth. We also have people who listen to this podcast who are just getting started, and their net worth is break even. And then you have another thing that could happen, which is your net worth could be negative. If you do have a negative net worth, never fear, 'cause your boy is gonna show you how to get out and increase your net worth over time dramatically.

And that's what we wanna make sure that we are doing. Uh, but if you do have a negative net worth, don't worry. A lot of people start there and they still build a tremendous amount of wealth. And so I want you to focus your time and energy on figuring out why that net worth is negative and then we're gonna work on a plan to get you out of.

That situation. And so as you're setting up your goals over the course of the next year, I want you to make sure that you have a goal in here and figuring out how long it's gonna take you to get away from that negative net worth and go into the positive. And it is one of the best feelings that you can ever have is working towards that positive net worth.

And so your assets, minus your liabilities, is gonna give you the number that is your net worth so that we know where we stand. Now, here's where the magic happens, is for those of you who are really tracking your net worth tight, if you have a negative net worth or you're just getting started, the there are areas that I want you to track it more frequently, and specifically I want you to track it month to month or even quarter to quarter, especially as you get started and you're trying to get.

Out of having a negative net worth. And so here's where the magic happens, and here's where the auditing is gonna happen even more frequently, if your net worth goes up, you're building wealth. If your net worth stays flat, you are obviously not really going in any direction. And we need to either focus on paying off more debt and or we need to start to buy more investments.

And if it goes down, that means you're taking on more debt, you're spending too much, and or your income just isn't high enough for your expenses. And we need to focus on growing our income. So this is gonna give us a bunch of different indicators on what we need to do. Next, and this is why in Master Money Academy, we built the Wealth Builders journey in a very specific way to ensure that you go through the proper steps in the proper order to make sure that you make that net worth number go up.

Because net worth is so important that we wanna make sure we see that trend line go up over that timeframe. And so whatever happens to your net worth is gonna give a big indicator of what you need to do next, and that Wealth Builder's journey is gonna guide you through that process. And so here's what I want you to do is as you start to do your net worth audit, we're gonna look for the red flags.

We're gonna start to wave those red flags and make sure that we are getting after it when we see the red flags. So I want you to ask yourself a number of different questions. One is your debt rising? Have you taken on more debt? Maybe you're taking on more personal loans just to get by. Maybe you just bought a brand new car.

Maybe you just bought a house, and so you have this mortgage debt on hand, and so you're gonna see a difference in your net worth. Every time you buy a house, maybe you are draining your cash every single month because you have a job loss or a different situation came up, and so you're having to deplete your emergency fund some.

Nothing wrong with any of these situations. We just need to know how it impacts our net worth and what's going on there. Maybe you're overspending. Maybe you need to automate your money, maybe you need a higher income. All of these are gonna be indicators and questions that we need to ask ourselves as we do these net worth audits.

Again, I told you your net worth is gonna make you get real with yourself, and some of these questions here are gonna give you the priority in the order of operations that you need to think about this. So again, make sure you download the checklist down below. It's gonna have some of these questions for you that you need to be asking yourself.

As you start to do this net worth audit. Now I wanna talk about a couple of mistakes that people make when they run the numbers on their net worth, because these are something that I really should not, don't think you should be counting as assets. Okay? So some of the things are gonna be things like jewelry beyond the melt value.

So you wanna look at jewelry as, if I melted this down, what would it be worth? A lot of people overvalue their jewelry because it's sentimental or they think it's beautiful or. All these other things, but what is it actually worth if you melted it down? That's the value that I want you to put for jewelry if you're putting it on your net worth statement.

Again, some other people like to classify depreciating assets that are really falling quickly. Things like boats or RVs, things like clothes. Things like future inheritance. All of these are great, but I don't like putting 'em on my net worth statement because they go down in value over time and your future inheritance is not guaranteed.

And so these are just different areas that I don't want you to think about. Also, future bonuses should not go on your net worth statement until it hits. Your bank account. So the inheritance in the bonus need to hit your bank account first before you count some of those things. If you can't sell it for material value, then it does not need to be counted in that net worth statement.

And so what I wanna do here is I wanna do an example of a net worth audit. We're gonna just give an example of someone out there, uh, who has, is looking at their net worth and they're trying to figure out exactly where they stand. So let's take a look at someone here. We're gonna call them Avery. Avery has assets in their checking, so they have $2,000 in their checking account.

They have $6,000 in their savings account. Their Roth IRA has $35,000. Their 401k has $60,000. Their home's value is at 350,000, and their car value is at $10,000. So their total assets, if you added all those things up, are $475,000. Now, Avery has a mortgage of 250,000 on her house. She's got a car loan of $7,000 and student loans of $11,000 and a credit card of 1500 bucks, so the total liabilities is gonna be $269,000, and so her total net worth is gonna be $205,500 and next month.

If she looks at it again and she's really trying to structure this, maybe it's gonna be $206,900 because she started to pay down some of that debt. And so you can see a big difference there, uh, of how powerful tracking can be and how you can check and see the differences. Because if you set up a goal and say to yourself, well, I want my net worth to go up 10% this year, I wanna see a 10% difference and I'm gonna pay down some debt.

I'm gonna make sure I have my some money invested, and I'm gonna make sure I'm tracking this. Very, very specifically, you could actually achieve that goal. Maybe it's 1% a month, maybe it's 1% a quarter. It doesn't matter what it is, but having that progress is really, really important. Now. Next I wanna talk about why it's so important to do these net worth audits.

And most people don't do 'em the right way. And we're gonna talk about why. There are two psychological reasons why your net worth makes you better with money automatically. And number one is because what gets measured gets improved. I want you to make improvement. Year in end, year out on your net worth.

And when you track your net worth, you naturally are going to spend a little less. You're going to invest more because you are tracking this. You're gonna pay off debt faster and you're gonna make smarter decisions. And this is the area that I think a lot of people just do not track enough of their metrics.

But once you start tracking, you're gonna see a massive, massive difference overall in your financial picture because you started to track your money. Also, it makes wealth feel real, not abstract, not some random number where there's a lot of people out there who are a little more wealthy than they think they are because they don't track these numbers.

They don't know that. Or there's other people out there who are way less wealthy than they think they are because they don't track these numbers. They don't know that. And so when you are someone who is spendy, maybe you have the Mercedes, maybe you have all the designer clothes, but you don't have the assets on hand.

Your net worth is gonna be a lot lower than you actually think it is. Whereas someone who has a lot of assets but they live frugally may feel like they're not as rich as they actually are, but they really do have a much higher net worth than they once attributed to themselves. And so this is something that I think most people need to understand is that this is going to make a big difference overall.

Now let's dig even deeper here because I wanna talk about how to grow your net worth fast over the next 12 months and some of the things that you need to be doing in order to make sure that you can accelerate your path to getting a higher net worth. Now, for those of you out there who do not think about this stuff and do not have goals associated with your net worth, I highly encourage you to start setting up goals over the course of the next 12 weeks to grow your net worth.

Now I like to set goals in 12 week increments, and the reason for that. Is multifold, but this is something where we can set up the next 12 weeks to see exactly where our net worth is gonna land. And we're gonna start to track this and see where our progress is going. Number one, one of the fastest ways to increase your net worth is to increase your income.

Why income is the fuel to the fire that is going to allow our net worth to grow because if we earn more income. And if we increase our income and we take the increase and we put it towards wealth building activities, our net worth is going to start to skyrocket. So if you think about a fire, for example, and your income is a small campfire, and then all of a sudden you start to make a lot more money.

And when you start to make a lot more money, your investments in your income are part of that fire. And you take that money and you put more of that money towards your investments, all of a sudden that fire is gonna grow and it's gonna grow even more and more and more over time. And the more money you throw, the more Kindle you throw into that fire, the larger that fire is going to get.

And once that fire is large enough, you don't have to work anymore. And so your goal is to try to make that fire as big as you possibly can. Income is the catalyst. It is the gasoline that you can pour on financial independence. And for every single person out there who's listening to this podcast who is interested in financial independence, I want you to take your income and pour it on that fire like gasoline.

When you think about every single dollar that you're gonna put towards that wealth building activity, this should be firing you up right now because this is exactly what is gonna get you to exactly where you want to go. The difference between your income and your expenses is the gap, and in that gap is where wealth.

Is built, and I want every single one of you to make sure that you are pursuing that gap. Taking that gap and putting it towards wealth building activities. Now, ways to increase your income is one at your day job learning. To ask for a raise. We have a free ebook now. If you follow this ebook, I promise you you're gonna get an increase in your income.

We have a free ebook if you go to master money.co/resources where you can download step by step exactly how to do this. Two is if you have no more income potential, it's your day job. Changing jobs could help you earn more money. Three is to start a side business. Now we have a bunch of episodes talking about side hustles that could turn into a full-time business.

Check out that series of episodes if you have not already. It is a very, very powerful series that can help you come up with ideas for side hustle. You can also do things like freelance or consulting in an industry that you know a lot about, and you can get certifications to increase your earning power over time.

If you're a nurse and you become a nurse practitioner, you can make a lot more money. And so there's things like that that you could be doing to increase your earning potential. Number two is to automate your investing. Now, we just did an episode on how to automate your Money. We will link it up down below in the show notes so that you can check that episode out.

But I want you to learn how to automate your investments, why it removes willpower from the equation, meaning that you can get more money into your investments without having to worry. And this is a really powerful place to be because you can do Roth IRA Contributions 401k contributions, HSA contributions, taxable brokerage account contributions.

This is the area. Where your wealth is gonna grow the fastest, we're gonna be building up wealth and buying more assets that are gonna increase your net worth over time. This is gonna make sure that you, your assets are growing in the area that we want them to grow, not in the housing category, not in your personal residence category, but in the all the other areas.

Number three is you can pay off high interest debt. So if you have debt above a 6% interest rate, then we wanna make sure that you pay off that high interest debt to increase your net worth over time. That is gonna help you dramatically when it comes to getting out of a negative net worth. And or just making sure your net worth starts to take up faster, and that's pouring fuel on the fire.

Also, making sure number four, that you have a cash buffer. Follow the 1 3 6 method. We have an entire episode on exactly how to save up for your cash buffer and your emergency fund so that you have that on hand. This is gonna help you when anything in life comes up. Number five is to improve your savings rate by 1% every month.

So we call this the 1% rule, but every single month, if you're starting with a low savings rate that's below 20%, we want you to make sure that you are increasing your savings rate by 1% of your income every month. This is gonna have a dramatic impact on your long-term wealth building ability. And then once you get to 20%, then you can make a decision.

Do I wanna keep going or am I okay at this 20% number? Next is use raises and bonuses to help increase your net worth. Every time you get a raise, every time you get a tax return, every time you get a bonus, use the 50 50 rule. Spend 50% on things that you wanna go out and do. Spend 50% on things that you value and take 50% and put it towards wealth building activities so that you can increase your net worth.

This makes it a balanced way to enjoy life, but also use your money to fuel the fire, which is exactly what we want to do. And then we wanna also utilize this to protect our assets. So things like making sure we have the correct insurance on hand, making sure we have the correct, uh, life insurance, disability insurance, whatever else you need.

Those are gonna help protect your income so that you don't have to worry later on down the line. And your net worth goes backwards because you had to take on debt 'cause you didn't have the right protections in place. Always, always, always have the right insurances in place. What should you do with your net worth over this timeframe?

Now, there's a couple of things that will happen to your net worth as you start to track this. One, it could go up and if it goes up, you're trending in the right direction. That means you're winning. Two is it could be flat and you're maintaining, but you're not building wealth, and so you have to make some tweaks or adjustments in order to ensure that you're building wealth.

And three, what could happen is it could go backwards and you need to make some real adjustments if it does go backwards. This is not to make you freak out whatsoever. Your job is not to freak out. Your job is to adjust, and so don't get emotional about this. Instead, let's start to make adjustments so that we can get our net worth going.

In the right direction. So I want you to download the free check list again so you can do your very own net worth audit. Make sure you're utilizing Personal Capital Monarch money and or a spreadsheet if you want to in order to make sure that you can track your net worth over that timeframe. And so now you know how to do a net worth audit, and this is gonna completely transform your finances over the course of the long run.

And if you wanna build wealth, you need clarity. This is going to give you clarity with your money. You're gonna understand where your assets are, you're gonna understand where your liabilities are. You're gonna understand why you want to actually get out of debt and why you want to make sure that you are paying off those liabilities.

You also wanna make sure that you are automating your money. The more that you automate your money, the higher you're gonna see your net worth go up over time, as long as you are making progress on those debts and increasing those assets in your timeframe. And so this is something where I would love to invite all each and every single one of you.

If you wanna increase your net worth, I would love for you to join Master Money Academy. That is the place in the community where we have a group of wealth builders who help people. Every single day. So we do weekly calls with me where I answer all your questions. That is where we have the Wealth Boilers journey, which is our 25 step system that tells you exactly what to do next with your money.

In addition, we have all our courses, everything else in there. We have a book club, we have small Master Money Masterminds, where there are small groups of people who are working on common goals like investing or travel hacking, all these different areas. That you can use to progress on your financial journey.

Again, I would love to invite you to join us in Master Money Academy, where you're gonna get real help from me and my team, and we'll be able to help you throughout your financial journey. Is one of my favorite things to do, is to get to spend time with community members inside Master Money Academy.

Again, if you made it this far, I invite you to join us in Master Money Academy. Again, thank you so much for being here. Our goal is to bring you as much value as possible in every single episode. If you got value outta this episode, share with a family member, share it with a friend. It would mean the world to me, and leave a five star rating review or a thumbs up on YouTube if you got a lot of value out of this.

Thank you again so much for being here. I truly appreciate it and I will see ya on the next episode.