Determine if you're in the red or black
Minimizing debt means getting to know yourself better, financially. The first thing you want to do is find your net worth. Knowing your net worth is a valuable tool for monitoring your financial progress from year to year, and ensures you're headed in the right direction. Calculating it is quite simple too. You just need to gather information on what you own and what you owe.
1) In one column list your assets including home equity, cars, valuables, bank accounts and retirement savings.
2) In another column list all of your liabilities including mortgage, car loans, credit card debt and any other debt you may have.
3) Next, total the two columns and subtract your liabilities from your assets
You now know your net worth. Regardless of the amount, or even if it's a negative number, you have a starting point. Record the date on your calculation and go through the same process next year or even in six months. It can be a powerful motivator for reducing debt - a personal budget is a great way to help you achieve your goals.
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