How to Improve Your Net Worth: Better Than Just Saving or Paying Off Debt
- Christina McNeal
- 6 days ago
- 8 min read
Perspective Matters
KEY TAKEWAYS
As we approach the end of 2025 and start planning for 2026, I know many of you are feeling the pressure. Basic expenses keep rising, and saving money feels harder than ever. If you're struggling to balance paying bills with building your financial future, you're not alone—and there's a better way to think about your progress.
Today, I want to introduce you to a concept that can change how you approach your finances: focusing on your net worth instead of just thinking about saving or paying down debt separately.
WHAT IS NET WORTH AND WHY DOES IT MATTER?
Net worth is simple to calculate: add up everything you own (your assets), then subtract everything you owe (your liabilities). What's left is your net worth.
Why does this matter? Because financial wellness means looking at both sides of your personal balance sheet. When you consider both your assets and liabilities together, you can make smarter decisions about when debt makes sense and when it doesn't. This approach helps you avoid the trap of following one-size-fits-all advice that might not work for your unique situation.
SHOULD I PAY OFF MY CAR LOAN OR KEEP MONEY IN MY SAVINGS?
Let me show you how net worth thinking works in practice.
Imagine two years ago you shopped around and found a great car loan at 2.9% interest. Last year, you put some money into an online savings account earning more than 4% interest. Traditional advice might tell you to drain that savings account and pay off the car immediately because "everyone knows" you should never borrow money for a depreciating asset.
But would that really be your best move? Not necessarily.
Here's why: if your savings account pays 4% and your car loan costs 2.9%, you're actually earning money on the difference every single month. Your net worth is growing by keeping both the loan and the savings account.
Yes, the car is losing value—but it's losing value at the same rate whether you keep the loan or pay it off. That depreciation happens either way, so we can take it out of the equation when deciding what to do with your cash.
My suggestion: Keep building that savings account while the interest rate stays above your car loan rate. Check the savings rate monthly. If it drops below 2.9%, then consider using that money to pay off the car. In the meantime, you're earning the difference and increasing your financial flexibility.
This is just one example of how thinking about your whole net worth—both assets and liabilities—leads to better decisions than following blanket rules.
WHAT TYPES OF DEBT ARE GOOD VS. BAD?
I know many people face higher credit card bills in January after holiday spending. If that's you this year, I want you to know there's no judgment here—just practical strategies to move forward.
Let's talk about the different types of debt and how to think about them:
Consumer debt is borrowing for things we consume or things that lose value quickly. This includes vacation charges, gifts, cars, clothes, and furniture. Every month, these items lose value while you're still paying interest. That's a double hit to your net worth—the purchased items go down in value while your cash goes to interest payments.
Investment debt is different. When you borrow to buy an asset likely to increase in value—like real estate—you need to consider the appreciation potential alongside the loan cost. Over time, real estate typically increases in value more than what you spend on mortgage interest (especially if you itemize tax deductions). That's why mortgage debt is generally considered "better" than credit card debt.
Understanding this difference helps you prioritize which debts to tackle first.
HOW DO I PAY OFF CREDIT CARD DEBT FAST?
If you're carrying credit card balances you can't pay off immediately, don't feel overwhelmed. Break it down into manageable steps.
First step: See if you're eligible to transfer balances to a low or zero-rate card. Watch out for transaction fees (often up to 5% of the transfer amount) and do the math to ensure you're truly reducing your costs.
Next step: Choose one of these two proven methods to tackle remaining balances:
WHAT IS THE AVALANCHE METHOD FOR PAYING OFF DEBT?
List all your debts with their balances, interest rates, and minimum payments. Make minimum payments on everything except the debt with the highest interest rate. Put every extra dollar toward that highest-rate debt until it's gone. Then move to the next highest rate.
The key: keep new expenses off your credit cards if possible. Use a debit card or, if necessary, put new charges on your lowest-rate card and pay them off immediately. As you knock out that high-rate debt, you'll see your total debt drop faster and faster—like an avalanche picking up speed.
This method saves you the most money in interest, especially if you're paying down debt over more than a year.
WHAT IS THE SNOWBALL METHOD FOR PAYING OFF DEBT?
Using the same debt list, make minimum payments on everything except the card with the lowest balance. Put all extra money toward paying off that smallest balance first, then move to the next smallest.
The same rule applies: pay current expenses in cash or on your lowest-rate card, and pay those charges immediately.
The benefit here is psychological. You'll see accounts reach zero faster, which feels great and keeps you motivated. That sense of accomplishment—watching those zero balances add up like a growing snowball—helps many people stick with their debt payoff plan.
Which method is right for you? The Avalanche saves more money. The Snowball provides quicker wins. Choose based on what will keep you motivated and what matters most given your specific situation.
SHOULD I USE CREDIT CARDS WITH REWARDS WHILE PAYING OFF DEBT?
Many of us use credit cards that offer cash back or points. These have real value, but run the numbers carefully. If you're earning 1% cash back but paying 5% more in interest than another card charges, the interest costs quickly erase your rewards benefit.
HOW DO I START SAVING MONEY WHEN I'M LIVING PAYCHECK TO PAYCHECK?
One of the most important habits for building wealth is "paying yourself first." This means treating your savings like a required bill—like your rent or mortgage—that gets paid every single month before anything else.
I know this is hard. We're all wired to meet immediate needs first because the future feels uncertain. Delaying gratification is genuinely difficult for everyone.
The secret to success? Get specific about your goals.
HOW CAN I STAY MOTIVATED TO SAVE MONEY?
General goals like "saving for a rainy day" or "saving for retirement" are smart, but they're too vague to compete with the temptation of dinner out or a weekend trip with friends.
Instead, get concrete:
Saving for a house? Answer these questions: What neighborhood? What style? How many bedrooms? Is there a yard? Find pictures of houses you love and look at them daily. When you're tempted to make an unplanned purchase, look at that picture and ask yourself: "Is this worth delaying my dream home?"
Planning a vacation? Choose your destination and find photos. Print them out. When you want to buy something on impulse, look at that beach or mountain view and ask: "Is this shirt worth postponing my trip?"
This works for almost any goal. Making your future specific and visible makes it easier to choose that future over today's momentary wants.
IS MY 401K EMPLOYER MATCH WORTH IT?
If your employer offers retirement plan matching, this is free money—and it should be your very first place for long-term savings.
Here's why: if your company offers a 50% match on up to 6% of your salary, and you contribute that full 6%, they add another 3%. That's an instant 50% return on your money. You won't find that kind of guaranteed return anywhere else.
Even if you're contributing to a Roth 401(k) or 403(b), the employer match typically goes in pre-tax. You'll pay taxes eventually, but you'll still be way ahead. This is one of the smartest money moves you can make.
WHAT IF MY FINANCIAL GOALS FEEL IMPOSSIBLE
I understand that when money is tight and expenses keep rising, financial goals can feel impossible. That's exactly why the net worth approach is so powerful.
Instead of feeling like you failed because you couldn't save as much as you wanted this month, look at the full picture: Did you pay down high-interest debt? That improved your net worth. Did you keep money in a high-yield savings account instead of paying off a low-interest loan? That improved your net worth too.
Every small step counts. Getting one credit card to zero is a win. Earning more interest than you're paying on a loan is a win. Contributing enough to get your full employer match is a win.
These victories add up and keep you motivated to maintain discipline for your long-term goals.
SHOULD I HIRE A FINANCIAL PLANNER? WHAT IS A FIDUCIARY?
As you start 2026, I encourage you to track where your money goes and make sure more of it is working for your benefit. One of the best ways to do this is by working with a Certified Financial Planner® professional who serves as a fiduciary.
Here's what that means: a fiduciary is legally required to put your interests first, always. We must recommend what's best for you—not what earns us the highest commission or meets a sales quota. Not all financial advisors operate this way. Some work under a "suitability" standard, which only requires that their recommendations be suitable, not necessarily the best option for your situation.
When you work with a CFP® professional who is a fiduciary, you gain a collaborative partner who helps you:
Assess where you are today honestly and without judgment.
Develop a realistic plan based on your actual situation and goals.
Navigate complex decisions about debt, savings, and investing.
Stay disciplined during volatile times by focusing on your long-term objectives.
Adjust your strategy as your life and the economy change.
Your financial wellness matters. You deserve a partner who's committed to helping you build the future you want—someone who's on your side, legally and ethically, every single day.
Here's to a financially healthier 2026—one smart decision at a time.
Certified Financial Planner™ professionals are fiduciaries, putting your interests first at all times. We can help you look at your entire financial life holistically and help you build a plan flexible enough to withstand what the next few years will bring.
If you'd like to discuss your specific situation and concerns, please feel free to schedule a conversation using the link below.
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