4 Ways To Increase Your Net Worth (And Keep Track Of It)
A large percentage of the population is becoming conscious of their finances. Most are looking to attain financial freedom as early as possible. They’re educating themselves on everything finances to help them get there.
Net worth is one of the aspects that’ll help you attain your financial freedom. Your net worth is the total wealth you have without any liabilities.
This article will financially educate you by giving you tips on how to increase your net worth. Read on to find out more!
1. Eliminate Debt
Debt is one of the major aspects that eat into your finances. In most cases, you spend each coin you earn, paying your debts. This defeats your goal of increasing your net worth. Therefore, start increasing your net worth by eliminating all your debts.
Create a list of all your debts, which include mortgage payments, loans, and credit cards. Come up with a plan of how you’ll offset them. It’d help to start with those with high-interest rates. Also, consider handling each debt at a time to avoid straining your finances. It’s also a great motivator to tick off a mortgage payment and move on to the next rather than having the whole list there every time. You won’t see yourself making progress and might abandon the process altogether, which is undesirable.
Once you’re done with your debt, refrain from going back to it. You can ensure this by spending within your means. If you want to make a purchase and can’t afford it, put it off until you’ve saved enough to make the purchase.
2. Lower Expenses
Are you wondering how to get rich? It’s simple: Lower your expenses by creating a budget. It goes without saying that the more you spend, the less money you’ll have to increase your net worth. Your budget should include both your wants and needs. Your needs include rent, water and electricity bills, car fuel, food, and health.
On the other hand, refer to your luxuries, such as entertainment and vacations. It might sound contradictory to budget for luxuries instead of eliminating them. However, you want to budget for luxuries to ensure you don’t get into debt to acquire them or use the money for your utilities to fund them. Your current spending habits should guide the amount you allocate for each.
As previously stated, budgets can help to increase your net worth. However, you’ll only get to that point by sticking to your budget.
How then do you ensure you stick to your budget? Ensure you make your budget as accommodative as possible. With an accommodative budget, you won’t need to deviate from it since it adequately takes care of your needs.
3. Set Up An Emergency Account
An emergency account is crucial to ensure you increase your net worth. As the name suggests, it’ll hold money to cater to your emergencies. Emergencies are bound to happen at one point, and there’s no timeframe for them. Without an emergency account, you’d have to take a loan, make money for your utilities, and even withdraw some of your investments. All these possibilities reduce the money available to invest.
Therefore, as you set aside funds for saving, put some amount into an emergency account. It’d be an advantage if the funds were in an interest-earning account. Instead of a yearly one, go for one that earns interest every quarter or six months. There’s a high probability you won’t earn much interest with an account giving interest yearly. You’re likely to have withdrawn funds several times in a year, reducing the amount of money earning interest.
As you set up your emergency account, ensure you can access the funds easily without withdrawal limits. You can get into debt and deviate from your financial journey with limits. How? Suppose an emergency arises and you need to withdraw funds. However, you can’t access the funds at the time because of a limit. You’ll be forced to take a loan or withdraw money from your savings account, defeating your purpose of increasing your net worth.
4. Invest Money
Most of the population is adopting savings as a lifestyle. However, some approach it incorrectly by putting this money in accounts that don’t generate interest. Others put their saved money in their homes. Your savings must work for you and not just lie around. Remember, most economies change, and there’s a likelihood of inflation in years to come. The money you’ve normally saved won’t make a big difference if you withdraw it during the inflation period.
Therefore, put your money in interest-growing accounts. Alternatively, invest in low-risk investment platforms, such as Money Market Funds (MMFs.) You’ll always have more money in your bank than you initially saved. Your money will be working for you. It’s good to note that you don’t have to invest your money in accounts. You can acquire assets, such as property, whose value increases with time.
Re-invest the interest you earn, at least part of it, to keep at it. This’ll ensure the process is continuous
Conclusion
The discussion above has shown you various ways you can adopt to increase your net worth and ensure you stay on track.
If attaining financial freedom is your dream, consider implementing the tips given herein.
By doing so, you’ll already be on your journey.