Increase Your Net Worth Through Home Ownership
What is Net Worth?
One of the best ways to understand your financial health and reveal the progress you’re making toward saving and paying off debt is through your net worth. Basically, your net worth is all of your liabilities (or what you owe) subtracted from your total assets (what you own). An income may fund your daily expenses and pay the bills, but it’s your net worth that gives long-term financial security.
Real Estate as an Investment
For the last five years, Gallup reported that Americans picked real estate as the best long-term investment when given a choice between real estate, stocks, gold, savings accounts/CDs, or bonds. Homeownership builds wealth in two major ways:
- “Forced savings” of paying down a mortgage and through appreciation.
- Increasing equity of your home.
Your home is typically your most valuable asset, but can simultaneously be your biggest liability depending on how long you’ve been paying on your mortgage. The longer you’ve been paying on your mortgage, the greater equity you have in your home – or the more net worth you have because you own that portion of your home. For example, if your home’s value is $200,000, and you currently owe $150,000 on your mortgage, your home will add $50,000 to your net worth.
Monitoring Your Net Worth
Tracking your net worth can help you identify areas where you’re spending too much money. It provides a realistic picture of whether you’re spending beyond your means, it can help you formulate a better plan to pay down your debt sooner, and it may even encourage you to begin saving or investing in other ways. Overall, your net worth helps you to evaluate where you are financially and enables you to make decisions that will affect how you reach your future financial goals, whether that is purchasing a second home or simply becoming completely debt-free.
If you’re ready to begin growing your net worth through homeownership, now is a great time to buy a new home! Dragas Companies offers new homes in Virginia Beach and Chesapeake with spacious, open floor plans in the form of single-family homes, condos, or townhomes in Hampton Roads’ best communities.