11. Net Worth
Henry doesn’t have much net worth yet. But, Henry plays with his net worth statement and projects that in 10 years, when he will have owned his $200,000 house for five years (which may appreciate), he can see his net worth growing in the future.
To check the pulse of your financial health, you should update a Net Worth statement periodically and ask yourself questions: “Is the balance increasing?” If not, perhaps you should try to budget more for savings, pay off some loans, or avoid adding any liabilities.
Henry may ask himself: “Is the balance an amount appropriate for my age?” Did you know if you put away only $20,000 by age 30, and, even if you never add another dime, and if it grows at 8 percent until you are 65, you will have amassed $360,000? Pretty amazing! But, that’s how interest compounding works.
You can learn more about compounding in the Saving and Investing Course. Keep in mind that the sooner you begin to manage your money and the sooner you can pump money into a savings account that grows and the more you can accumulate in savings, the more financially healthy you will be.