finances

4 Ways To Improve Your Net Worth

net worth

Your net worth can be easier to improve than you think.

Do you know your net worth?

Knowing your net worth may not seem like an important detail to know, but being aware of this piece of information helps to keep you on track with your finances and monetary goals.

So, how do you determine your net worth and what is it? Basically, your net worth is the value of your assets (bonds, savings and retirement accounts included) subtracted from your liabilities (or debts). Calculating your liabilities is fairly easy, considering is it the total amount you owe including any loans, mortgages, and the like. Assets, on the other hand, can be a little trickier to establish due to debates many have in the industry about whether or not certain items, like your home or car, are actually considered an asset due to their depreciation over time as well as costs going in for maintenance. Assets should put money in your pocket, not take it out; however, for the sake of argument, let’s say your vehicle counts toward your overall net worth.

So, if your total assets are more in value than your liabilities, you have a positive net worth. If the value of your assets are less, then your net worth is negative. Throughout your life, your net worth will fluctuate. The goal, though, is to create a steady trend up to increase your assets, decrease your debts and, therefore, enhance your net worth.

If this stresses you out and it feels like you will never have less liabilities than assets, fear not. There are many ways you can improve your net worth. Here are a few:

    1. Increase your income. Easier said than done, right? But with the growing digital age, there are many ways you can make money online simply by being on your computer. If getting a higher paying job isn’t an option for you right now, look into blogging or selling items on Ebay or Esty. These are great ways to make some extra money each month, with little costs in overhead. Plus, you can use this side business for write-offs in the home on your taxes.
    2. Pay more money toward your debt. Any chance you have to pay more money toward your debt you should take. If you are only paying the minimum payment each month credit cards, student loans, etc., adjust your budget to try to include higher payments toward this debt. For instance, you may find that over the course of a month you are spending $30 or more on just going out for coffee. Cut back on those coffee shops and use that money toward your liabilities instead. Every penny counts, and your net worth will thank you.
    3. Save a quarter of your income. If you want to increase your net worth at a faster rate, saving more will help you do this. While a common recommended amount to save is 10% of your income, 25% will give your net worth percentage the extra oomph it needs. If this seems like a lot, consider taking 10% of one paycheck and 15% of another and use that total toward either a savings account, a retirement fund or something similar.
    4. Create a passive income. They say time is money, and the less time you have to spend actually making money while simultaneously increasing your bank account, the better for your net worth. There are a few routes you can take to create a passive income. Affiliate marketing is an option (if done ethically and correctly), but you can also invest in stock and bonds. Index funds, Guaranteed Investment Contracts (GICs), dividend stocks and bonds are examples of opportunities for you to make more money through income-generating assets. If you’ve never invested in stocks, you will want to consult with a professional first.

Finally, a great book on this subject is The Millionaire Next Door. The authors are a couple of marketing professors by the names of Thomas J. Stanley and William D. Danko. Their book is groundbreaking because it takes a realistic look at how America’s rich got that way. What they found was that millionaires were self-employed or owned boring profitable businesses. They also famously found that millionaires made decisions based cumulative future value (for example, saving money over your lifetime by not smoking) and took aggressive advantage of tax-deferred investing strategies. If you are serious about increasing your net worth, buy, read and re-read this book.

You won’t increase your net worth over night, but you can take continuous steps to improve it so that you can reach your financial milestones much faster.

 

Write-Offs For Small Businesses That Are Often Missed

Write-offs for your small business

Write-offs for your small business

Write-offs are often hiding right under our noses.

If you’re a small business owner that has yet to file your 2015 taxes, you’re probably jumping for joy over the news that taxes are now due April 18 instead of April 15. And, if you do have yet to file, this also buys you a little more time to review and evaluate your expenses and potential deductions with your accountant.

As you finish the filing process, be sure to keep these write-offs for small businesses that are often missed in mind:

  1. Your startup costs. As surprising as it may be, if you are in your first year of business, costs accrued to start up your business count as capital expenses and can be deducted up to $5,000. If fees go beyond this limit, you can opt to write-off certain initial investments over a period of 15 years. Also, if your attempt to start your business is sadly unsuccessful, you can still deduct the costs as a capital loss.
  2. Health insurance premiums. While this expense would not be considered a business write-off, you can deduct this as a personal expense on a 1040 form if you are self-employed. Deductible premiums includes ones paid for yourself and your immediate family.
  3. Home office. You may already be aware of this one, but small businesses tend to forget about this or often surprisingly steer clear of trying to include this in their write-offs due to worry of an audit to the business owner. If the space is used strictly for business, though, and nothing else, such as entertainment for guests or other family members, this is a business deduction from your taxes. Your home office doesn’t need its own room to count; it can still be a part of another room in the home. To determine the amount that is deductible in a shared space, you would measure the work space and divide by the square footage of the room. Read more about the home business tax filing and deduction process here.
  4. Bank fees. Charges from your bank for ATM withdrawals, account fees and the like are completely deductible. Make sure to keep this in mind when filing and reporting your expenses throughout the year.
  5. Office supplies. Keep a steady record of the receipts and purchases of your office supplies used for your small business. These will help to provide a tax break for you.
  6. Furniture and other equipment. Office furniture or furniture and equipment used for your company can be deducted in full the same year of purchase or depreciate, which is taking a portion over a period of time. For furniture, you would deduct through the course of seven years. For other equipment, such as computers and printers, you would depreciate for five years.
  7. Driving your car. If your vehicle is a staple for your organization, the IRS permits you to write-off some of the costs. Even if you only periodically use your car for meeting with clients or other business-related exchanges in between your personal errands, you can still receive a tax break for related costs. Just be sure to maintain strong documentation on mileage, gas, parking and toll fees and even the justification for drive. We recommend immediately writing this information down per trip with the date included to avoid having to go back and remember these tedious details.
  8. Credit card interest. If you were paying for business items with your credit card, you can deduct the interest paid on the card on your taxes.

Some other expenses that can be write-offs for your small business include but are not limited to: education costs, subscriptions to industry publications or memberships related to increasing knowledge in your trade, travel charges, and even some entertainment expenses. You can read more about those tax breaks in this helpful guide.

Make sure to always inquire about what can be included as a deduction for your small business so that you can use more funds to do those bigger things we know you are all meant to do.