Learning how to increase your net worth will enable you to feel a greater level of security about your future during your retirement years. It will also allow you to buy more things or travel more and it will help you meet emergencies readily. Knowing your net worth will let you determine your financial health and give you better control over your money.
You can calculate your net worth by adding your assets (the things you own, including your savings, investments, property, retirement accounts, collectibles, etc.) and subtracting the total debt you owe. Do not include income in this figure. Understanding this figure and keeping track of it over the years will enable you to get a good picture of your financial health at any time.
You can increase your net worth, starting today, by taking the following steps:
1. Start Reducing Your Debt
All debt that you reduce will increase your net worth. Start by seeking to eliminate the smallest debt you have and the ones with high interest. You can reduce the increased interest by getting a balance transfer credit card, taking out a home equity loan, or refinancing your mortgage. Consolidating your debt will also increase your credit score.
2. Reduce Extra Expenses
If you do not already have one, create a budget. It will enable you to see areas of spending that you can reduce or even eliminate. Eating out less and not buying specialty coffees every day can help you save more money or reduce debt faster. Meal planning will enable you to spend less at the grocery store if you only buy what you need for planned meals.
3. Take Advantage of Employer’s Matching Funds
If your employer offers matching amounts, putting the maximum amount of allowable contributions into your retirement account will give you the fastest way to build up assets for retirement. The money your employer adds is free and will increase your net worth faster. The more money you have in a retirement account and the longer it is there can make a massive difference in the total when it comes time to use it.
4. Invest Your Money
Build your net worth by making sure your money is earning interest of some kind. Do not let it sit at home, not earning anything. Depending on your age, your risk level is higher the older you get. You can put money into savings accounts, bonds, and investments. Remember, diversifying your portfolio is the safest way to protect it. So, be sure to put your money into low-cost investments, or you may be minimizing your gain.
5. Avoid Always Buying New
You can put more money away in savings and investments if you do not buy the newest and latest, including cars and electronics. While new is nice, it will cost you. Buy vehicles that will last for many years and do not get the latest sports models – which will cost considerably more for insurance. Cars also have high depreciation values in the first one or two years.
6. Stop Increasing Your Debt
If you have multiple credit cards, you want to avoid adding new debt to them. The only time you should do this is if you can pay off the entire bill each month. This way, you will avoid paying interest, but you will also benefit by increasing the points the card offers.
You can also save money when taking vacations only when your points will pay for it, and this lets you avoid all (or most) of the extra costs often associated with holidays.