Have you cratered your savings and spiked your debt? A negative net worth can lead to a negative quality of life.
Perhaps your net worth is in the red from the stock market sinking, the housing market crashing, or just from making poor investment decisions. No matter how deep of a hole you’re in, the worst thing you can do is nothing. What matters is that you are ready to do something about it.
How do you rebuild your net worth when it’s below rock bottom? Start with these 9 steps.
Drive Yourself Out of Debt
Rebuilding your negative net worth can be daunting, but it is not impossible. First things first, get in the driver’s seat.
Being passive is not the right approach when it comes to debt tackling. Whether it’s credit card debt or personal loans, know your exact grand total of debt. Ignorance is not bliss when it comes to finances.
Start small and create a timeline. Set realistic goals for yourself and estimate how much (extra) money you can put towards debt each month. Though it may seem like a hard nut to crack, getting out of debt is crucial in taking back control of your finances and reclaiming a positive net worth.
Score More Money
It’s easier said than done, but one of the most effective ways to rebuild your net worth is by increasing your income. Whether you pursue a side hustle, land a second job, negotiate a raise at work, or score a higher paying job altogether, boosting your income can make all the difference in rebuilding your financial situation.
The extra income will help alleviate financial pressure and offset the financial strains of living paycheck to paycheck. A secondary job doesn’t have to permanent – just until you can achieve financial peace of mind.
Don’t Call It a Budget
Another great way to rebuild your net worth is by creating a budget. But if you’re turned off by the B word, just don’t call it a budget. Rename it. Whether you’re struggling to cut back on unnecessary spending or having trouble finding a sweet spot between saving and spending, a budget is an effective tool for helping you bounce back and rebuild your negative net worth.
There are many reliable budgeting tools and strategies, for example, the 50/30/20 method or the envelope system. Choose one that works best for your lifestyle, and then adopt it. Try to think of a budget in a positive light – not as something that will detract from your quality of life, but as something that will enhance your quality of life over the long run.
This mindset amendment will help you stay on track with your finances and give you a sense of accountability and motivation for getting your net worth back on track.
Avoid Past (Poor) Money Mistakes
There’s no need to beat yourself up over past mistakes. Rid yourself of financial regret and give yourself grace for not knowing better until you did. Everyone can relate to money mistakes in some way or another. The important takeaway is understanding the factors that led you to this negative financial state in the first place in order to then make sure you don’t repeat these mistakes in the future.
Give Your Expenses a Haircut
How much are you spending each month on unnecessary expenses? From dining out to monthly subscriptions, it’s essential to look at your credit card and/or bank statements to identify any areas for improvement.
Once you have done your homework, identify anything you deem to be unnecessary and eliminate those expenses in order to reduce your overall spending. Small tweaks can still make a difference.
Seek Help or Find Community
Another strategy for rebuilding your net worth is to seek professional help from a financial advisor. An advisor can offer valuable advice on how to manage your money and assets best, as well as provide you with investment options that have the potential to grow over time.
Consulting with a financial expert can help you bounce back and rebuild your net worth if you are unsure of where to start. Hiring the right advisor is money well spent.
However, if you rather not spend any additional money on a financial advisor, you can instead look for financial support groups on social media. Having a community of people aiming to establish financial wellness can help create group accountability.
Give Your Credit Score TLC
Improving your credit score is another way to rebuild your negative net worth. Chipping away at debt and ultimately eliminating debt not only supports your credit score, but it also makes it easier to obtain financing for any future financial endeavors. Give your future self the gift of good financial health.
Have Long-Term Vision
Focusing on long-term results rather than short-term wins is essential when rebuilding your net worth. While making impulsive decisions or taking bigger risks with your money may be tempting, it’s important to set financial goals and keep your eye on the bigger picture. Establish a timeline for rebuilding and stick to it, no matter what temptations arise.
Stay Positive
If you’re reluctant to feeling positive, keep in mind that your attitude can boost your overall momentum to stay committed to your goals. A negative mindset during financial hardship or uncertainty is understandable, but you must approach the situation with an open mind and a sense of hope.
With hard work and dedication, you can overcome any setbacks and regain control of your finances. Remember that the best things in life come to those who work hard for them, so remain forward-focused on the end goal and stay the course.
The Takeaway
Rebuilding your negative net worth after it takes a hit may seem like an uphill battle, but it can be done with reflection and correction.
Regardless of your preferred strategy, staying focused and motivated throughout the journey is key.
By managing your finances proactively and effectively and avoiding mindless mistakes, you can begin to regain your financial footing and improve your financial wellness one day at a time.
EDITORIAL DISCLOSURE: This website is for general information purposes only. The views and opinions expressed in this blog article are solely the views of the author. The content on this website is not intended to be relied upon as advice and/or a recommendation. You should not rely upon the information on this website as a basis for making any financial, lifestyle, career, or other decision. Any action taken from the information on this website is strictly at your own risk. While efforts are made to keep this information up to date, NoWayKnowHow.com makes no guarantee, expressed or implied of the completeness, accuracy, availability, or reliability of the information, products, and services mentioned on this website. NoWayKnowHow.com will not be responsible for inaccurate or incomplete information contained on this website. NoWayKnowHow.com is not liable should this website be unavailable due to technical issues or deactivated for any reason whatsoever.