Boosting Your Net Worth: What You Should Know About Life’s Common Liabilities

Net WorthYour net worth is pretty simple to calculate, but there’s more to your finances than just a dollar amount. Even if you have a high net worth, the nature of your liabilities could be holding you back from your maximum potential. Your net worth changes frequently in response to your earnings, saving, and spending habits. If you want to increase your net worth from where it is now, you basically have three options. You can reduce your liabilities, increase your assets, or do a combination of both.

Your Mortgage

Your mortgage is probably your largest or most valuable asset. It serves a dual purpose - giving you a place to lay your head at night and building up a savings in the form of home equity. As your equity value increases, your net worth increases. But how do you increase the equity value of your home?

Well, there are a few ways. You can wait for market forces to push up the total value of your home while you continue to pay down your mortgage. You can also do renovations to the home if you want to take a more proactive approach.

In general, renovations like updated kitchens and bathrooms have the highest payoff. Upgrading your counter tops to granite or some other non-porous stone will almost guarantee a higher sale price. Hardwood floors, stainless steel appliances, and real stone tiles in the bathroom all add value and quickly.

Finally, doubling up on mortgage payments, using a portion of your investment earnings and even principal to pay off the mortgage early, or switching to bi-weekly payments will decrease the amount of interest you pay on your home loan and rapidly increase the equity in the home.

A related expense with mortgages is homeowner’s insurance. While you can certainly shop around for better rates, one of the best ways for high net worth individuals to improve their net worth is to use premium financing companies to pay the premiums. A premium financing company is a financial institution that lends money to high net worth individuals so that they can pay premiums on insurance policies.

Why do this? Because the loan, even with interest is often cheaper than paying premiums directly. The savings you realize can then be used to pay additional payments on your mortgage, further improving your net worth.

Student Loans

Student loans are another common liability that even high-net worth folks have to deal with. The average student loan balance is $24,301 as of 2012, according to the Federal Reserve Bank of New York. Roughly 25 percent of students owe at least $28,000 while 10 percent owe more than $54,000. A small, but growing number of people owe $100,000 or more.

Most students hope to pay off their student loans in short order, but the reality is that these loans are being stretched out for decades. Out of 27 million people in the U.S. who have some type of student loan, about 40 percent are aged 30, roughly 42 percent are between the ages of 30 and 50, and 17 percent are older than 50.

If you’re looking for a quick way to knock down that debt, it’s often just a matter of good budgeting. Sometimes consolidation works, especially for non-federal student loans. Getting your interest rate as low as possible will help you pay off the loan more quickly.

Credit Card Debt

Credit card debt is a problem that nearly everyone faces at least once in their lifetime. Even high net worth individuals get into trouble sometimes. If you’re struggling with this, you’re not alone. People with credit card debt often owe more than $15,000. If you’re making just the minimum payment on this amount, it would take you about 33 years to pay off, and you’ll rack up more than $20,000 in interest charges.

That’s not doing your net worth any favors. Start with the lowest interest rate card first. Once that’s paid off, move on to the next-highest interest rate card, rolling the just-paid-off-credit-card payment into the next card. Repeat this process, “snowballing” your debt until everything is paid off.

Car Loans

It doesn’t matter what you drive. All Lexus’, Mercedes’, BMW’s, and fancy sports cars come with loan payments (at least for most people). Getting these loans paid off pronto is key to improving your net worth.

If you’re financing it at preferred rates (i.e. 0.0 percent), it may not make sense to pay off the loan to improve your net worth. However, higher interest rate loans should definitely be refinanced periodically to take advantage of lower principal amounts.

Jermaine Easterwood works in personal finance. He enjoys writing for finance and money management blogs to help people make the most of their assets.

First Ever Net Worth Report



Well it’s the moment you’ve all been waiting for, I’ve finally decided to post the Eyes on the Dollar Net Worth. I’ve seen some other bloggers who do this, and it usually inspires me to do better myself.

I use a spread sheet in Google Documents to track our net worth so I don’t have to do any math. Determining net worth is easy. Add up what you own.Then, add up what you owe, and subtract the difference. Don’t get discouraged if you don’t come up with a positive number. We had a negative net worth for a long time. As long as you are moving toward positive, that’s the important part.

I don’t expect that anyone else should have the same assets or liabilities that we do. Personal finance is personal, and everyone is at a different place in their journey. We all have different goals and time frames to achieve those.

Let Me Explain


A few points before I share the numbers:

  •  Yes, we probably have too much in cash. We have rentals, and something major could always need repair. I also sold a portion of my business this year, and I’m not sure what the tax burden will be just yet. After tax season, we will likely put some of this into a brokerage account or use it for a down payment on another rental.
  •  Our retirement accounts probably seem low for our age (39 and 43). This is because we screwed around early in our careers and didn’t max anything out. We have also used our money for buying my business and purchasing real estate. We are hoping to create enough rental income to support us when we stop working to pay the bills, hopefully long before age 59.5. Also, Jim should get a pension if the state doesn’t go broke at some point.
  •  All real estate values are based on comps in the area and recent property appraisals . Zillow rated the values way too high in my opinion.

 Eyes on the Dollar Net Worth as of October 10,2013


  •  Cash (checking, savings, money market accounts) $53,741
  •  Retirement (IRA’s 401K, 403B) $172,278
  •  Taxable Brokerage Accounts $4,177
  •  529 College Savings Account $4,870
  •  Daughter’s Roth IRA $5,515 (Do this and the 529 count toward net worth?)
  •  Optometry Practice $300,000
  •  Commercial Office Building $275,000
  •  Primary Residence $375,000
  •  Residential Rental $80,000
  • Flip House Project $100,000 (This one is an unknown. The house is close to done but has no flooring or appliances currently. I believe with it’s location, it would sell for this amount if it were listed as is. Hopefully by the next update, this will be off the books.)
  • Vehicles $25,890 (From Kelley Blue Book)

  Total Assets $1,242,730


  •  Home Mortgage $157,501
  •  Residential Rental Mortgage $46,379
  •  Commercial Building Mortgage $202,638
  •  Flip House Loan $87,000

  Total Liabilities $493,518

 Net Worth $749,213


This makes me happy and sad. Despite paying off all consumer debt and student loans over the past few years, we still have almost a half million dollars in real estate debt. Good debt or not, I wish it was lower.

My other selfish reason for posting net worth is to inspire us to work harder. Whether a million dollars makes you rich or not, I really want the 7 figure net worth, and as of today, I’m joining J$’s million dollar club. I’m setting the goal of reaching that within the next six years.

Million Dollar Club

If we can knock out all the mortgages, while continuing to invest in our IRA’s and brokerage accounts, we should be there. Since Jim’s 401k and 403b plans are not that great, and there is no match, we see no need to try and add to those at this point.

I probably won’t post net worth that often, and I may take this post down if it feels uncomfortable. I’m curious to hear your thoughts.  If you must throw stones, do it softly.

Have you tracked your net worth? Why or why not?

Does It Make Sense to Pay Off The Mortgage Early?

About two years ago, I went to an optometry conference hosted by the Public Health Service. I started my career with an PHS residency, and was very close to taking a career position with the government. I ultimately chose to go into the private sector, and bought my own practice in 2002. It has been rewarding in many ways, but I was growing disillusioned with being a business owner, and this conference made me consider going back to working at a government clinic. The wheels started turning, and now I am a month away from selling my practice. Since the buyer has worked for me for the past two years, I am comfortable carrying his business loan as a seller finance.  I will continue to see patients part time in my old office and at a public health clinic (best of both worlds!) on a part time basis. I own our office building, and the buyer will stay in the same space and rent from me. With my husband’s income, my part-time income,  rental income from our residential and commercial properties, and the loan payment from my buyer, we should be doing well barring some unforeseen circumstance. Now that I’ve gone around the world with that introduction, the big question of the hour is should we pay off our mortgage early?

I have continually struggled with a workable budget. I know my husband and I want to be at a point where we can retire in 10-12 years. I just wasn’t sure which steps to take in how to get there. Jake from I Heart Budgets was kind enough to take me on as a Friday Budget Submission, which you can read on his blog. Ultimately, his calculations show that if we stick to our current path, we could be free of all debt, including our mortgages, in about six years. That’s assuming we choose to pay everything off, but is that the best option? When you aren’t sure which path to take, make a list of pros and cons.

Cons of Paying Off the Mortgages

  1. Low Interest Rates-Our primary mortgage is a 3.25% and our residential rental is at 4.25%. The commecial rental will be paid off in two years, so I’m not figuring this one in. One could argue that we should find  investments that would return more interest that what we would be paying off.
  2. Tax Deductions- We would not have the mortgage interest tax deduction if we paid everything off early.

Pros of Paying Off the Mortgages

  1. Money Saved on Interest-If we paid off both properties on the accelerated schedule, we would save over $60,000 in interest. Even if taxes go up, this is much more than our tax deductions would be if we kept the mortgages until their original payoff dates.
  2. My Investments Might Suck-If we tried to invest in stocks or other rentals, we could very well make more than 4.25% in interest, but what if we have another 9/11 and the stock markets crashes, or what if we buy a rental that sits empty or has hidden repair costs? What if we pick stocks that are terrible? It’s all a bit of a gamble.
  3. Security-Perhaps this is the biggest reason to pay off our mortgage. We love our house and have no plans of moving, at least until our five year old is out of school.  I have never really though about throwing everything at the mortgage. It seemed like a pipe dream, but the more I think about the idea, the better I like it. No matter what happens, we have our house. With watching my in-laws lose a house they were in for over 30 years, knowing that won’t ever happen is a pretty empowering feeling.
  4. Increase in Passive Income-If we paid off the rental, even if we never raised the rent, our passive income would increase from around $300 per month to about $650 per month.

It seems that I have answered my own question. The Pros list is double the Cons list. I realize there are some other things that will pop up that we will need to add to the budget like doctor and dental visits, school activities that get more expensive as our daughter grows older, and household repairs to name a few, so we could be a little off on the calculations. We might also make more income that projected and pay everything off sooner. (Perhaps my blog will get bought out for a $$$$!)

When my husband and I got married in 2002, we owed about $350,000 on my business and commercial property, around $100,000 in student loans, and $100,000 in mortgage debt, which increased to $215,000 when we built our house. We also were really stupid and took out car loans and got into credit card debt to the tune of over $30,000. Talk about a negative net worth! Buying my business was the smartest financial move I’ve ever made, even though taking on that amount of debt has kept me up many a night. I think selling will be the second smartest. To think that we can be debt free in six years is amazing, and I’m on board for making it happen. Whether it makes sense of not, we are paying off the mortgage early. I hope you stay around to enjoy the ride!

Do you think we should pay off our mortgage? Feel free to disagree. Do you have a plan for financial freedom? Why not?

I also have a guest post today about how people waste money on eye care at Club Thrifty. Be sure to check it out or you might end up on Holly’s naughty list!