Home | Ask Your Question | Mortgage Glossary
Find me a lender for:  
The Quickest Way to Significantly Increase Your Net Worth By Don Adams

Your net worth equals what you own minus what you owe. It is commonly referred to as the difference between your total assets and your total liabilities.

Heres a simple illustration:

Home Value = $350,000 Mortgage balance = $150,000
Investments = 100,000 Credit cards = 20,000
Auto = 45,000 Auto loans = 30,000
Savings = 15,000 Bank loan = 4,000
You Own = $510,000 You Owe = $204,000

Therefore, your net worth would be $306,000.

There are two ways to increase your net worth. You can own more things or you can reduce your debt obligation. This article will focus on reducing your debt first because it is the fastest way to generate more money and, then, buy (own) more things.

In our example, you have $204,000 of debt. If youre like most people, you pay less attention to the mortgage and car loan balances because you consider them to be rather normal (necessary) to your way of life.

The credit card companies are probably charging somewhere between 12 to 18 percent (forget those slick, short-lived introductory teasers) and the bank loan is probably around 6 percent.

Now, before we go further let me ask you a question. Which is faster? Create $204,000 (in other words, own more) ... or reduce $204,000 of debt? In both instances, the result is the same because your net worth will have increased by the same amount.

To create $204,000 in 15 years, you would have to invest $6,956.69 each year for 15 years and receive a guaranteed 8 percent rate of return. Where can you find a guaranteed rate of return this high in todays marketplace? No where!

To reduce $204,000 of debt in 13.5 years, it takes only $100 extra each month. Now, lets make sure you understand what I just said.

To increase your net worth by $204,000 you must invest almost $7,000 each year for 15 years. You hope and pray youll receive no less than 8 percent average every year.

Or... you can come up with only $100 each month to reduce 100% of your debt (to include your mortgage) in only 13.5 years --- guaranteed! Hard to believe isnt it?

Go ahead and check it out yourself. First, use a compound interest table to compute the investment requirement. Then, print out and complete this debt reduction chart. Youll need an Adobe Reader, which is probably already installed on your computer. Otherwise, go to adobe.com for a free download version.

In every instance, it is faster and more reliable to eliminate your liabilities than to increase your assets. Why? Because the interest you pay on your debt is excessively higher than the guaranteed interest you can earn.

By following the debt chart and adding an additional $100 each month to the minimum payment requirement, you can dramatically compound the effect of your payments and expedite the complete elimination of all your debt.

Its a lot easier to come up with $100 extra each month than it is to find $6,956.69 each and every year for the next 15 years.


Don Adams is a veteran financial consultant who has helped hundreds of individuals address a variety of money issues. More wealth building information is available at http://personal-finance-on-the-net.com




See Also:

Interest Only Loans
These days, as people scramble for new and more creative ways to finance buying a home, the interest only mortgage is becoming more common and well known. An interest only mortgage is one in which you have the option of paying only the interest (or just the interest and a portion of the principal) ... more...

Interest only Home Loans: Are They for You?
1. You are a First Time Buyer and cannot Qualify. For the first few years of purchasing a home, most of the mortgage you pay goes towards interest, not principal. With the interest only payment option, the lower payments are more manageable and you can use the money you save to pay off other ... more...

Tips Regarding Interest Only Loans
What are interest-only loans? How are they structured and who are they right for? How do you avoid common mistakes people make when choosing interest-only loans?Loans with the option of paying only the interest every month are called interest-only loans. These loans allow you to pay on the ... more...

Interest Only Mortgage A Short Term Fix
Interest only mortgages can be a savvy fix to a short term mortgage need. When used properly interest only mortgages can save homeowners a lot of money. Here is how to use an interest only mortgage and stay out of financial hot water.Interest only mortgages have always been a risky proposition. ... more...


More on only interest...

Search More Info On:

  • Only Interest
  • Interest Only Loan
  • Interest
  • Mortgage Debt
  • Credit Bank
  • Find Loan
  •  

    Shop For Your Mortgage Now!
    Shop For Your Mortgage Now!

    You'll be re-directed to Top-Lenders.com

    Want to Know Your Rate?
    Get Customized Mortgage Quote Instantly

     
    ExplainingMortgages © 2005 - 2009