5 Ways to Start Increasing Your Net Worth Today
If you asked 100 people if they enjoy living a paycheck-to-paycheck life, you would be hard-pressed to find one person who says, “Yes.” Living from one check to another is difficult, but there are many things you can do today to grow your net worth and become financially comfortable.
First, here is a quick definition of net worth. Your net worth is an overview of your economic value. It is the difference between your assets, such as bank accounts and property, and liabilities, such as mortgages and debts. Increasing your income and lowering your debt is the most basic formula for increasing your net worth.
Here are five simple steps to get you on the path to financial freedom.
Ask for a Raise
Your net worth is the difference between what you have and what you owe, so an excellent way to increase your net worth is to increase your income. If you have been doing a great job at work, consider asking for a raise. An excellent time to request a reasonable increase in your salary or hourly rate is during your annual review. A year will give you time to collect evidence that will support your request. Have you created innovative products? Boosted revenue in your department? All of these accomplishments can be used to help you get the salary you are worthy of. It can be scary to ask for a raise, but as long as you go through the proper channels, ask professionally, and work hard, there is no harm in requesting more money.
Build Multiple Sources of Income
Another way to increase your income is to diversify your sources of it. Make money outside of your day job. Try selling your talents as a freelancer or independent contractor, adding a second job, building an online business, or renting out a room in your home. Diversifying your income is an excellent way to add hundreds or thousands of dollars to your bank account, and it can also give you some cushion if you lose your regular job.
Branching out from your day job is only limited by your imagination.
Tally Your Liabilities
Your liabilities are derived from debt that is owed each month. They may include your mortgage, loan payments, or credit card debts. To increase your net worth, you may want to remove or reduce unneeded liabilities. Can you refinance your high-interest loans or credit cards? Are you able to pay a higher amount on your student loans or make more frequent payments?
In the case of your high-interest loans, you can refinance them and lower their rate. This will allow you to pay more towards the principal amount each month, which will reduce the interest. For your credit cards, a 0% balance transfer is an excellent way to refinance them. This promotional rate lasts for a certain amount of time. Avoid interest charges by adhering to the promotional period’s end date.
Spend Less Money
This is the simplest step to increasing your net worth. Whether you are skipping your morning coffee or purchasing a car that will have lower insurance, spending less money will increase your net worth. It is hard to grow your wealth when you are spending your income on items that have no value, decrease in value, or that you simply don’t need.
Complete a budget review and eliminate or reduce any unneeded expenses. For example, you can cancel unused subscriptions, pack a lunch, and walk more.
When you limit your spending, you will have more income to invest. The more you invest, the higher your net worth.
Invest
There are many avenues for investing, such as stocks, bonds, mutual funds, and real estate. If you are interested in low-risk investments, you can place your money in index funds or blue-chip stocks. These investments have a stable growth pattern and history. Average returns from the S&P 500 can grow your net worth by 7 percent annually.
You may also want to try “The Bucket System.” This investment strategy involves separating your liquid, or on-hand, investments into four buckets:
- The cash bucket
- The income bucket
- The growth bucket
- The alternative income bucket
Investing can look intimidating, but you do not need to know everything to invest your money. Read books and articles, get advice from a financial advisor, and research low-risk investments to begin your journey. If you would like more customized tips to increase your wealth, consider contacting a wealth management team like Daniella Rand’s. Eventually, you may take on higher-risk investments, which can have a higher return.
