For accountants, your personal net worth is one of the simplest calculations they might be asked to perform. Add up your assets in column A, add your debt in column B, then subtract B from A to find your net worth. It's a number you should know, or at least be able to estimate, and it's good to check it every year. Since it's the beginning of a new year, the sweet spot between New Year's resolutions and tax time, there might not be a better time to figure out your net worth than right now. When you do, don't forget all of the value that might not translate into worth. We've got a short breakdown for you, along with a way to maximize the value in your life while minimizing how much it costs you:
Your education increases your net worth, even though it may not look like it. Very few investments offer the rate of return that continuing education does. Those who finish their college degree earn, on average, about twice as much as those with a high school diploma over the course of their lifetimes, and the gap has been widening for at least 35 years. Still, your future earning potential doesn't show up on your net worth, even though your student debt does. If you're trying to decide whether to go back to school, take a few extra classes or get a new certification, the cost may seem intimidating since there's no immediate benefit. Don't let that fool you.
An education can also increase the value you get out of your life, helping you find a job that makes you happier or getting that promotion you've been wanting at your current employer. Outside of work, going back to school can help you learn a new language or skill you've always wanted to learn, get you up-to-date on current technology and trends in your field, and model good life choices for your children. Just wait until they see you doing homework on a Friday night!
It also doesn't have to cost an arm and a leg, and you don't have to try for federal financial aid. We have a variety of products designed to put some money in your pocket now, whether it's a home equity loan, a personal loan, or any of our other financial plans. If you're thinking to yourself, "But I'll be 40 (or 50, or 60) by the time I finish," remember, you'll be 40 (or 50, or 60) anyway.
Find out information about our loans that could make it happen here: penair.org/Loans
Your kids are a drain on your net worth, but a blessing in your life. Let's face it, kids are expensive. The Department of Agriculture estimates that raising a child born this year to the age of 18 will cost about $250,000. While a quarter of a million dollars is a lot of money, that only gets them to age 18, but with tuition prices skyrocketing and kids staying at home longer than they have historically, the actual figure of raising children today gets much higher much faster. Financial analysts predict the average four-year tuition for a public university in 2030 will be $250,000, or about the same as it cost to raise that child from birth to dropping them off at the dorm. If you have two children, you could easily spend one million dollars on them before they leave college. In your net worth, this is only reflected as a constant drain on your savings, a net negative.
The value of children is probably pretty obvious to you, but there has to be a way to lower the cost of raising them, right? First, let's cut down those college costs, because that's half the battle. We've got a variety of college savings programs that offer great returns while also being tax-deductible. Getting to $250,000 might seem like a pipe dream, but saving even a little every month can add up quickly, thanks to compound interest.
Next, let's find a way to save money on school while helping your child now. There are a lot of ways to encourage a gifted child, from tennis camp to musical instruments. If your child wants to stare at the Internet all day, maybe you should talk to them about a new laptop and some software engineering classes for kids. If they like the outdoors (or you'd like them to go outside occasionally), try a digital camera. All of these ideas cost money now, but could result in scholarships down the road, all while giving them a head start on a career or passion they can follow their whole life. If you're wondering how you can pay for all of that, check out our money market accounts and share savings certificates. You can contribute a little money every month, and you'll have enough for those classes or that camera before you know it.
Your home is your biggest investment. When was the last time you checked up on it? When you bought your house, it might have been the best available house in the neighborhood for the price. After all, if it weren't, you would have bought some other house, right? Is it still the best in the neighborhood for the price? Is the neighborhood still regarded the same way by home buyers? How do you know? This weekend, it's time for window shopping. Take the value of your home from your last appraisal and check the Internet for houses in your area in the same price range. How does your house stack up? Make a list so you can compare between houses. Next, check your decor. When you moved in, did the house feel a little dated? Did you do anything about it? How many of the houses you saw online seemed newer or more fashionable?
After you finish your house hunting, you've got three options: If you saw a house that you like as much as the one you're in now, but it's going for less money, you could think about moving there. After all, mortgage rates are incredibly low for the time being, and if you could be just as happy in a less expensive house, then that's money you could use on something else. If your house is as good or better as the others in the neighborhood, but could use a facelift, you might want to think about remodeling. Remodeling your home can increase its value and make it easier to find a buyer, so part of what you spend now may come back to you when you sell, with the added benefit of living in a nicer house in the meantime. Finally, if your house is still the best around, think about refinancing while rates are low. You're probably not going to find fixed rates this low for a long time (if ever), so locking in that lower rate now can save you tons of money going forward, while cashing out some equity can help knock down any pesky credit card debt you need to take care of, so you only need to write one check every month, while paying far less in interest.
If you're looking for a first mortgage or if you want to remodel, check out our home equity lines of credit (HELOC) here: penair.org/Mortgage
If you want to see what a refinance can do for you, we've got a simple form here: Mortgage Check-Up