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Davon Long Professor Agosta Eng 111-410 1 July 2013 Process of Increasing Financial Net worth A crashing ocean wave settles in front of your beach towel as you are drinking your dirty vodka martini on the soft sands of Waikiki beach in Hawaii. It has been two days since your arrival in the state of Hawaii and you are having the time of your life. The sound of ocean waves crashing onto shore puts you at ease. Vacationing in Hawaii is just one of the many benefits that you are reaping as a result of your effective financial management. Throughout the years, you have learned that the process of increasing your net worth involves decreasing your liabilities and increasing your assets. Comprehending the process of increasing financial net worth requires a complete understanding of the accounting term net worth. Net worth is calculated by subtracting all liabilities owed by a company or individual from all the assets owned by that company or individual (Siegel, Joel, and Shim 295). For this paperarticle, the term net worth will be used in the context of individual net worth. Financial asset manager Ronald Long is a financial specialist at Prudential Financial Inc. Ronald Long believes that the first step of increasing your net worth should be decreasing your liabilities. Liabilities consist of all the money you owe to lenders and suppliers. Some examples of liabilities include credit card debt, personal loans, car loans, mortgages and utilities obligations. One important strategy in reducing your liabilities involves paying off your debts that carry the highest interest rates,, Ronald says. High interest rate debts usually compound or
Comment [R6]: This is good. You are giving examples and defining terms that the everyday person might not use. Comment [R3]: Still having some spacing issues with extra spaces in random places. Comment [R4]: Great job citing your source Comment [R5]: Paper seems really academic which this isbut we are positioning it for a wider audience. Comment [R2]: Ha, at first I thought this was an odd opening, BUT it draws the reader in, creates a desire to have that moment of success, and gets them to listen. Good job. Comment [R1]: Great MLA here

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multiply if they are not taken care of fast enough. Compounded debt increases long-term liabilities in the future, which decreases any cash flow or free money that you may have. One other tactic that can be helpful when paying down high interest rate liabilities involves calling your loan servicer to see if you can consolidate all of your current loans into one large personal loan. Consolidating debt usually results in receiving a lower interest rate on the total balance owed. This strategy will be effective at reducing extra interest cost. If high interest rate debts are paid off then the cash flow or free money left over from the paid debt will be classified as an asset. Creating multiple assets is an essential aspect of controlling debt and increasing financial security. Spending less than you earn is also another way that you can decrease your liabilities. David Heisenberg a current stockbroker at Wells Fargo bank Inc. recommends, that every adult implement the seventy, twenty, ten, spending rule. The seventy, twenty, ten, rule states that seventy percent of your income should go to living expenses while twenty percent should be applied to some sort of savings account. The final part of this strategy involves spending the remaining ten percent on yourself. Integrating the seventy, twenty, ten, spending rule into your financial plan will ultimately create a cash surplus, which in turn eliminates the need to take out personal loans and lines of credit. The cash surplus created by using this plan comes from the money left over after you have paid your liabilities. On a personal note, the seventy, twenty, ten, strategy helped me eliminate five thousand dollars worth of liabilities within a time span of two years. Cutting down on counterproductive expenses and keeping your checkbook balanced are the last two elements in the process of reducing your liabilities. Bad expenses are defined as expenses that disrupt and or eliminate the financial cash flow of essential surplus elements
Comment [R7]: This is a great segue into a personal note that keeps the distance but backs up the claim that this method works.

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required to increase financial net worth. Some examples of bad expenses include eating out excessively, buying more clothes then necessary and purchasing the latest technologically advanced gadgets. By cutting down and eliminating some of these extra expenses you increase the margin between your income and debts or liabilities. Overdraft fees and other bank miscellaneous fees such as returned check charges, account maintenance charges and excess activity charges all fall into the bad expenses classification. Balancing your checkbook is one simple way to eliminate miscellaneous liabilities. This strategy can easily be implemented by registering for an online account with your banking institution. By registering for and opening up an online banking account, you enable yourself to access accounting information in real time. Analyzing your bank account will allow you to foresee any potential deficits that you may encounter from overspending. Having access to this information is critical part of maintaining a balanced bank account.
Comment [R9]: Great tip Comment [R8]: All my bad habits.

Phase two in the process of increasing financial net worth involves increasing your assets. Assets are defined as any goods that can be turned into currency in the marketplace. Assets hold economic value in the marketplace and can provide a cash flow in the future. Examples of assets are stocks, bonds, mutual funds, retirement accounts, real estate, cash, cars, and material goods. After following all the steps in phase one of this process, you should have a cash flow or surplus. Ronald Llong believes that the easiest way to start increasing your assets is by opening up a basic savings account. A savings account is one of the most fundamental ways to increase your assets without taking huge risk., says Ronald. Currently the national interest rate average for a savings account is zero point zero seven percent. Although this rate is relatively low, savings accounts still provide a basic way to increase your assets. Savings accounts also offer
Comment [R11]: Hmm, I think maybe putting the actual numbers out there is easier to take in than spelling them out. Comment [R10]: Since Ronald is still saying the second line, you can keep it all together. If you want to show that the two quotes werent said in succession, put between them, which means you are omitting some words that were spoken.

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two other benefits. These benefits include federally insured protection for your money and potential steady interest rate growth. Earning money off your assets is one of the most fundamental ways to increase your net worth. David Heisenberg believes that every adult should invest in a stock market index fund after saving six months of salary in a savings account. A stock market index fund is a fund that invests in a multitude of stocks and replicates long-term trends in the stock market. The significance of this investment is that the stock market has increased by twelve percent annually over past twenty years. This means based on past trends your assets will increase by twelve percent every year that you have capital invested in stock market index funds. The diversified element of index funds also reduces the risk of major losst in capital by not concentrating all securities into one stock. Ronald long Long says that index funds are also cost efficient because they do not require analyst to perform transactions. The absence of analyst reduces the overall operating cost of the fund. Every year the banks and other financial institutions in American implement stricter requirements for approving loans. The Price of food and consumer goods continues to rise with no end in sight. In todays fluctuating economy, it is essential that all steps referenced here today be implemented into your financial plan as soon as possible. Increasing financial net worth is a goal that every adult in this country should strive to reach and it seems to be the only logical solution to most financial issues of todays economy. In closing, the process of increasing financial net worth involves decreasing your liabilities and increasing your net assets. In order to complete this process you must follow several steps. These steps include paying off high interest rate debt, spending less money than you earn, balancing your bank account, reducing bad expenses, opening a savings account, and investing surplus cash.
Comment [R12]: This was REALLY informative, and people can read these and understand simple ways of putting them into use. I thought your language was really good. It probably felt like an overuse of you because we typically dont write that way, but it is perfect for a process essay. You integrated quotes and research really well. Im impressed. May I use this as an example for future classes?

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ReferencesWorks Cited Long, Ronald. Personal interview. 25 June. 2013. Heisenberg, David. Personal interview. 21 June. 2013. Siegel, Joel G., and Jae K. Shim. Dictionary of Accounting Terms. Hauppauge, N.Y.: Barron's Educational Series, 2000. EBook Collection (EBSCOhost). Web. 7 July 2013.
Formatted: Indent: First line: 0.5"

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