The majority of people spend their entire lives trying to increase something called “net worth,” though many don’t realise it.
The term net worth is just the remainder you get when you subtract the monetary value of your assets from your liabilities. So, for instance, your assets might be your house, your car, or your checking account. And your liabilities could be things like the money you owe other people. This way, you can have both a positive or a negative net worth. People with positive net worths have more assets than liabilities, and for those with negative net worths, it’s the other way around. Society doesn’t owe them money, they owe society.
Increasing your net worth is a challenging process and is something that can take many years of patient work and dedication. However, there are some shortcuts that you can take to increase it rapidly.
Let’s take a look:
Review Your Liabilities
Most people would have a much higher net worth if they didn’t take on so many liabilities. Taking out a loan, for instance, is not the same as buying dogecoin.
When you buy dogecoin, it counts as an asset since it isn’t money you owe other people. However, when you take out a loan, you do owe other people, and you have to pay interest to boot.
If you have savings, consider paying off your liabilities first. This way, you can avoid high interest payments. You can usually do this instantly by transferring money out of your savings account and using it to pay off high interest loans.
Remember, your money only earns 1 or 2 percent in a savings account. But you could be losing 10 to 20 percent per year on credit card balances or personal loans.
Recalculate Your Assets
Sometimes, people underestimate their net worth because they fail to include all their assets in the calculation.
Here are the assets you’ll want to consider:
- Your residence. This is the place where you spend the majority of your time. You can calculate your net work by subtracting the remainder on your mortgage from the current sale price of your home. The remaining sum of money if your property equity.
- Your other properties. Next, add on the value of any other vacation properties of second homes you own, after subtracting any mortgages or loans on these.
- Investments. Next, take a look at your investments. Investments include stocks, shares, bonds, commodities, and any other financial securities you might own, like a pension fund.
- Collectibles. Lastly, take a look to see whether you own any valuable collectibles. Things like art, fine wine, classic cars and antiques can all add substantially to your net worth.
Cut Your Expenses
Nobody wants to trim their expenses. But when it comes to building your net worth, it’s often necessary. Getting rid of things that cost you money in the short-term is a surefire way to build greater wealth over the long haul.
Which expenses should you cut first? Well, primarily you should think about selling your vehicle and walking to places. Yes – relying on foot isn’t always practical. But owning a motor vehicle is a massive drain on your wealth and something you’ll want to avoid if you can.