![]() When you swipe your credit card you create a liability. For example, having a loan on a jet ski which is likely to depreciate in value, is different from having a loan on a new home in a growing community, which is different from having a student loan for trade school which may result in you earning a higher lifetime income. For example, loans on assets that have the potential to appreciate in value, or a loan for college or trade school are different than from loans used to purchase depreciating assets or whose value declines with age. The types of things you have loans against can affect your net worth over the long term. Like assets, not all liabilities are created equal. Some liabilities can act like a boat's anchor that drags along a lake's bottom, slowing down your ability to build and grow your assets. Instead, it is typically payable at a future date or over a longer time period with periodic payments. What you owe is called a debt or "liability." You create a liability when you decide to borrow money or use a line of credit like a credit card. Any employer match is a 100% return on your contributed money and it doesn't get any better than that! This "free money" may contribute significantly to the building of your net worth over the long term. Many employers offer matching contributions. For employer-sponsored retirement plans, it's generally recommended that you contribute a minimum of 15% of your gross pay or the maximum amount allowed by the IRS. IRAs and retirement plans are great ways to accumulate assets with income or appreciation potential. Maximize contributions to IRAs and employer-sponsored retirement plans Examples include all sorts of material wealth items with a limited life span like electronic equipment, cars, boats, snowmobiles and jet skis. Assets that may negatively affect your net worth over the long term are assets that are more likely to depreciate in value. Examples include: bank certificate of deposits, treasury notes and bonds, real estate, individual stocks and bonds, exchange traded funds, and mutual funds. ![]() For example, assets with income or appreciation potential may help build your net worth. Some types of assets are more likely to help build your net worth over the long term, while others may actually reduce your net worth. What you own is called an "asset." But not all assets are created equal. Tracking your spending will help you identify the difference between "have to" spending and "want to" spending that when combined create a spending pattern that may impair your ability to build your net worth through a financially healthy and disciplined approach to saving and investing.Īcquire assets that are more likely to provide income or appreciation potential over the long term To get a handle on where your dollars and cents go, track your spending over a two-month period.
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