One Step Agenda for Increasing Wealth: Cut Liabilities!

Companies generate cash flow statements, balance sheets and profit and loss statements, and these are immensely useful for ascertaining the correct financial health of the company. In the same manner individuals can assess their financial health by calculating their net worth which, simply stated, is the excess of assets over their liabilities. Just like companies, individuals also need to improve their net worth over time.

About assets and liabilities

When we speak of assets we mean your home, car, household possessions, bank deposits, savings and investments, and also your income from every source like salary, interest receipts and rent. Assets will include all items that can be assigned a monetary value, market value or a direct cash value. Remember that assets purchased depreciate in value and they will not command the same value as when they were purchased. And, you cannot assign a value all by yourself; assets will fetch only that value which the public will be capable of or willing to pay.

Under liabilities you will place all loans, credit card balances, rent or mortgage, utilities and taxes; they represent all that you owe to outside parties. Aggregate all your assets and subtract all your liabilities and what you get is called as your Net Worth, an estimation of your financial stability.

Ways of boosting net worth

As any estimation of net worth involves only two variables, your assets and your liabilities, any effort to enhance your net worth should be directed towards increasing your assets or decreasing liabilities. The major problem is that fulfilling big dreams like owning a home and a car or providing education to your kids involves taking on bigger liabilities that stretch your limited sources of income. All this clearly indicates that you have to budget asset increase in such a way that the liabilities side can be serviced comfortably by existing income sources. Another point to be kept in mind is to ensure that your levels of savings and investments also increase proportionately, like for example a 401k fund. Acquiring big assets through loans must be balanced by improving your savings levels.

Decreasing debts to increase your net worth

It is well-nigh impossible to liquidate all liabilities at one stroke on a limited source of income, particularly a steady salary that grows incrementally over time. One way out is to augment your income by bringing in additional revenue through overtime or part time jobs, but this has limited potential particularly in a strained economy with strong undertones of unemployment and underemployment. But what you can do in the interim is to cut costs as much as it is practical. To begin with list down the previous month’s expenses and analyze how individual spending habits can be controlled. By trimming away the excess fat of unwanted expenditure your financial status improves visibly and more funds get freed, that can be channeled for debt servicing and for long term investments.  Proceed in this fashion for months and years and watch your assets grow as your liabilities decline.

Using a cash loan for title to cut liabilities and improve net worth

One way of drastically cutting liabilities is using a loan for vehicle title for consolidating and liquidating your unsecured liabilities like credit card balances. This dramatically improves your credit report, and prevents you from accessing cards to raise your liabilities any more through wasteful spending.

The car equity loan requires you to place your car title papers as collateral for a loan that raises an aggregate sum equivalent to 60% of your car’s resale value. The auto collateral loan levies an interest rate not exceeding 25% APR, but a highly flexible repayment program ensures that you are cleared of the liability within the shorter term without stressing your income. The pawn car title loan also offers lower amortized monthly installments that can help you extend loan payment over a longer term if that suits your finances.

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