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Amassing six figures in savings within a few years might seem impossible if you are mired in debt or don’t make big bucks. But that’s exactly what Richard Meadows pulled off last year at the age of 26.
The business journalist achieved his goal of saving $100,000 in about four years — despite carrying student loan debt and working in a field “not known for lucrative salaries,” he .
Accomplishing that goal involved multiple wealth-building methods — paying off his debts, teaching himself the basics of investing and overhauling his spending, for example. But Meadows traces his success back to starting a single simple habit: tracking his wealth.
As he recently , “If you’re not measuring something, then you don’t have that feedback loop. You don’t know whether you’re heading in the right direction.”
How he did it
Meadows was writing about net worth for work when he became curious about his own. He computed his net worth only to find it was a negative number. “My savings and other assets were completely wiped out by my debts — and then some,” he wrote.
That realization prompted Meadows to scrutinize every aspect of his finances while keeping in mind his desire to ditch the traditional 9-to-5 work life. He also started tracking his net worth monthly, which helped keep him motivated along the way to his $100,000 goal:
“Things really started humming along after I customized a spreadsheet to track my net worth. Every month I got a little buzz out of seeing the number climb higher and higher. I could also tell if progress was slowing, and give myself a metaphorical kick in the butt as required.”
How and why you should track your net worth
Your net worth is basically a dollar figure equal to your assets minus your liabilities. Or as Localpizzadeliverywalledlakemi.info founder Stacy Johnson puts it in “20 Top Tips for Less Labor, More Leisure,” your net worth is what you own minus what you owe.
So to compute your net worth, you must add up your assets and add up your liabilities. Then subtract your total liabilities from your total assets. That’s it.
Examples of assets include the money in your bank and investment accounts, as well as the value of possessions you own, namely homes and vehicles.
Examples of liabilities include any outstanding debts, such as credit card debt and loans.
To track your net worth, create your own spreadsheet as Meadows did. Or, look for a budgeting app that features net worth computation. Some such apps are free.
Meadows’ road to financial freedom is based on a universal financial lesson we often emphasize. Here is Meadows’ take on it:
“Sorry to disappoint, but there is no magical way of getting rich. … The true ‘secret’ is simple: Live on less than you earn. Save and invest the difference, and let compound interest do its thing.”
Stacy explains this concept in even simpler terms in “Want to Be Rich? Here’s All the Advice You’ll Ever Need, in 10 Simple Sentences“: Becoming wealthier each month is as simple as spending less than you make. And yes, you guessed it — getting poorer is as simple as spending more than you make.
Do track your finances? Let us know what has worked for you by commenting below or on .