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Manage Debt & Grow Your Net Worth

You can’t grow your net worth if you’re saddled with debt. However, there are two kinds of debt. There is spending debt, such as when you use your credit card to pay for dining out, travel, or buying extra clothes. Then there is investment debt, which means the debt you accumulate is being put to good use and should lead to a return in the future. Let’s first take a look at an excellent type of investment debt and then cover how to grow your net worth.

Investment Debt

One of the best investments you can make is college. If you educate yourself and combine what you learned with a creative mind, there is no telling where you can go. Add hard work and determination and you have a ton of potential. If you have already taken on student loans and you want to simplify your debt, it’s highly recommended that you do some research on student loan consolidation. If you’re not familiar with student loan consolidation, it means you’re combining multiple student loans with different rates and term lengths into a single loan. If you do your research, you should be able to figure out which option fits you best.

The First Step

Once you consolidate your student loans, you can move to the next step, which is growing your net worth. If you can look to put 10% of whatever you earn into your savings account, you can pay yourself first as a rule of thumb. This is a methodical approach and it’s highly effective. While 10% doesn’t sound like a lot, if you’re doing it for every income period, it obliterates what is considered a good annual return in the stock market. Keep in mind that your savings account never suffers a crash or has a bad earnings report. It may be tough to come up with the needed funds to pay yourself, especially if you have a pile of monthly bills, but now is the time to reduce any unnecessary expenses you might have. Download your last debit or credit card statement and it might surprise you just where every dollar is going.

The Next Step

As far as the stock market goes, this is a place to dabble. Don’t go all-in but give yourself some exposure. The key to successful long-term investing in the stock market is to go with companies that have proven they can deliver over and over again. These are called Blue Chip stocks. Most Blue-Chip stocks have a market cap of at least $10 billion. At this size, they don’t have as much room to grow as a technology startup, but with that much capital they can handle almost any storm as they are much bigger ships to turn. With Blue Chips, you’re not going to see incredible returns, but you’re not going to have to worry either. You should see moderate returns as well as consistent dividend payments. And if you want to increase your potential by using Blue Chips, you can cost-average down, which means adding money to your investment when a Blue-Chip stock takes a hit. They will eventually turn it around. They usually do.

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