How to Build Your Financial Net Worth

Debt is regarded as one of the ugliest four-letter words when it comes to your financial well-being. Is this description of debt well-deserved, or should the concept of debt be revisited to understand how it can be used to work in one’s favour? The age-old expression: It Takes Money to Make Money is certainly true. However, one of the best ways to grow your net worth is by investing other people’s money for your own benefit. This brings us to the reality of Debt in America. Debt-driven economic growth is the name of the game in the US. According to leading financial resource, DebtConsolidation.com research substantiates claims that the US is quickly approaching the unprecedented debt levels of the 2008 global financial crisis. Debt in America today is becoming a major bugbear to the financial well-being of the typical US household. Consider the following data compiled by the FRB of New York: • Credit card debt per borrower in the United States ranges from $2,859 - $4,985 (2016 figures). The states with the highest debt include Alaska, Washington DC, Virginia, New York, New Hampshire, Massachusetts, and Connecticut. • Student loan debt figures per borrower range between $2,859 on the low end and $4,985 on the high-end. The states with the highest student loan debt per borrower are Georgia at $6,340, Pennsylvania $5,660, Ohio $5,780, Minnesota $5,980, and Maryland $6,010. • Automobile loan debt per borrower in the US in 2016 is also significantly higher than it was in 2008. According to the latest stats, automobile loan debt ranges from $2,859 on the low end to $4,985 on the high-end. • By far the biggest component of household debt is mortgage-related debt. The level of mortgage debt has dropped since 2008 and now ranges between $30,602 and $42,732 per borrower. States like California have an average debt of $51,890, Hawaii $52,380, Washington DC $59,270, and Alaska $40,940. How Big a Problem is Debt for US Households? It is important to understand the extent of debt in the United States to gauge its effect on the average US households. Debt is unavoidable however the bigger issue is the interest repayment on the debt. If interest is being charged in double digits, or even high single digits, the debt repayment over time becomes extortionary. It is imperative that debt is repaid quickly, and high-interest debt is eliminated as soon as possible. Various options are available to make this happen, including debt consolidation whereby clients take out loans at lower rates of interest than the current rate. These loans then finance the repayment of all debt at a lower interest rate. Of course, debt-financed investments are common. The bigger question is how to use debt to generate income. If the revenue streams generated off the debt (including interest on debt) are greater, then the debt serves a purpose. The goal is to stay ahead of the curve by gaining added value through things like education, mortgages, and steering clear of high credit card debt and personal lines of credit. This is how financial self-growth is facilitated.