#Boost #Net #Worth #Powerful #Strategies
Your net worth can tell you many things, but it is just a way to measure your financial success. Many have calculated their net worth and come to the conclusion that it needs to be replenished, but improving it can seem very difficult. However, it just takes some guidance, a little willpower, and a lot of patience.
Key takeaways
- The first step to increasing your net worth is to eliminate debt. Net worth is equity minus debt, so reducing that debt increases net worth significantly.
- Making smart investments, not just in stocks, is a sure way to increase your net worth. Purchasing a reasonable car or house, and keeping luxury expenses low, are all important steps.
- Net worth does not necessarily mean wealth. For some, a positive net worth is a goal they should be proud of. People with high levels of debt such as those with medical bills and student loans should celebrate when their net worth finally turns positive.
Pay off your debts
The money you owe is money that can be used to grow your net worth. Pay off all your debts as soon as possible, but be aware of the penalties that can apply for early repayment (as with a mortgage).
Consolidating your debt by taking out a loan with a lower rate to pay off high-yield debt is a tried-and-true strategy. The bottom line here is to know what you owe and have a plan to pay it off. Make extra payments where possible and work to reduce your overall debt load.
Identify and target high-interest debts first, paying off less debt along the way.
Your maximum superannuation contributions
Many private employers offer retirement plans with desirable tax characteristics. Other tax-advantaged accounts (such as a Roth IRA) are also available. In fact, many employers have matching programs that will help you grow your contribution faster.
By not taking advantage of such programs, you are leaving money on the table. Retirement contributions create a two-fold benefit. They defer your taxable income to your lowest earning years and increase your available productive assets. Taking action now for your retirement will help slow one of the biggest barriers to growing your net worth: taxes.
Reduce expenses by realizing expenses
No one likes to hear that they are spending too much and need to cut back. We all know that eating out at restaurants or buying the latest gadget catches up with us, but what we don’t realize is how quickly small expenses can add up, too.
Get into the habit of writing down your expenses every day for a week, and you’ll be shocked at how much comes out of your paycheck. The goal is not to stop eating out or stop hobbies altogether, but rather to be aware of your spending habits and identify areas where you can make adjustments; A little goes a long way.
In addition, remember that debt from the first step? A large portion of it comes from credit cards. Cutting off your credit cards and using only the cash you have on hand will help limit your spending.
Keep the money you’ve saved where it will grow
You probably already have a savings account, but are you using it? Your checking account should be lean enough to cover your regular spending, and everything else should be in interest-bearing accounts. Better yet, invest what you can. Some people tend to be risk averse, so take a look at guaranteed investment contracts (GICs) or bond funds.
If your savings are in a coffee can on top of the refrigerator, you’re not making your money work for you and you’re undermining your hard work. As a side note, resist the urge to spend any windfall you may receive right away; Invest it to ensure that you will continue to reap the benefits in the future.
Buy the car you’ll drive forever
It can be guaranteed that a car purchased today will be worth much less in one year. Combine this depreciation with maintenance costs and insurance premiums, and you have a recipe for the true financial cost of owning a car.
Every new car you buy ultimately reduces your net worth. You can reduce the negative financial impacts of owning a car by only purchasing the vehicle (or vehicles) you need, and focusing on driving it until you need to replace it.
Talk to a professional
This is the most important and most overlooked step. People don’t want to pay to consult an accountant or financial advisor often because they feel embarrassed about the state of their finances.
However, speaking to a professional can give you the latest information on how to take advantage of tax breaks or help you prepare your budget. Never be shy to ask for help and use available resources.
#Boost #Net #Worth #Powerful #Strategies
