I’m in the negative. Now what?

No where to go but up?

In my last post I calculated my current net worth, and found the results to be less than desirable. My current net worth is a negative $ 1,754. Ouch!

Some of you may not be familiar with net worth, or how to calculate it. Net worth is simply your assets (the value of things you own, plus money in accounts and investments) minus your liabilities (the things you owe money on, such as loans and credit cards). This is the best way to see your full financial picture. If you only look at what you have in the bank, you’re getting a false idea of where you stand financially. You have to look at the whole picture.

Even though I currently have a negative net worth, I feel fairly confident about the direction I’m headed in financially. I’ve been working very hard to cut back on spending, which I’ll detail in future posts. I am also working on ways to increase my income. In personal finance there tend to be two schools of thought: You can spend less than you earn, or you can make more money. I’ve decided to approach my financial situation from both fronts.

One thing I’m trying to keep in mind about finances is that you have to think long-term. This is especially true for me, since some of the things I will be doing to increase my financial worth might have a negative effect in the short-term. For example, I currently have a job in Accounting making approximately $ 45,000 annually. Not bad, especially considering my Bachelors Degree is in Graphic Design. However, there is much room for improvement in the world of Accounting, which is why I’m going back to school for a Masters in Accounting. The courses I’m taking will also qualify me to take the CPA exam, should I choose. In the long run, this is a great idea, as it could lead to doubling, maybe even tripling, my income. But the Masters program is estimated to cost around $ 20,000. And even though it will be spread out over 2 years, it’s still more than I’m capable of paying out-of-pocket. This means student loans, which add to my liabilities, bringing down my net worth. On the plus side, I will be eligible to try for merit based scholarships, which will decrease my need for loans. There are millions of scholarships out there, many of which are not based on financial need. It takes some time in finding them and applying for them, but hopefully it will be worth the effort.

Another issue that will negatively affect my net worth in the short-term is an upcoming sewer project. My city has elected to connect all outlying neighborhoods onto the city sewer system. The main sewer line on my street was completed in late Fall, and we’ve been given until April to condemn our septic tanks and connect to the sewer system. My contractor is charging $ 1,800 to run a line through my very long, tree covered yard. This is in addition to the $ 2,500 the city is charging for the connection (which will be added to my water bill over the next 5 years, with interest), plus $ 200+ for all the permits. Did I mention connecting is not optional? If you haven’t connected by the deadline, the city will hire their own contractors to run the lines, charging you a premium for the work. In the short-term this project has a negative impact on my net worth. However, in the long run it will lead to higher, or at least more stable, property values.

On a brighter note, I have been working diligently to decrease my monthly spending to less than 50% of my monthly income. The extra money will help greatly in overcoming some of these expenses, and in creating a buffer for any future unexpected events. I am also looking at selling my 2011 Nissan. This would enable me to pay cash for a used car (which I already have lined up), and will reroute $ 210 per month towards other goals. Small steps forward. But every step counts!

So, I know where I am now. I know some of the set backs that are in the immediate future. And I have a plan for staying on track. What are some of your suggestions and thoughts?

– Ms. W

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