You might have seen in recent headlines about some of the biggest names in the top 10 or top 100 richest people in the world. Alongside their names is the phrase “net worth,” followed by billions or millions of dollars.
What does that mean, exactly? Do all of us have that? How does net worth grow? And why should we bother increasing it? We’ll try to answer these basic questions about net worth in this article.
What Is Net Worth?
Your personal net worth is basically the total of everything that you own when converted to cash, except for your liabilities. Basically, if you were to sell your house, car, business, and virtually every personal possession and subtract your debt, mortgage, or loans, that would be your total net worth.
Methods in Increasing Your Net Worth
There are plenty of ways to increase your net worth. When you purchase something of high value, it is then added to your assets’ total value. Building your net worth is the right path in boosting your assets and saving more money. Here are some ways to do that:
Buy a house
If you’re still renting, you won’t be able to grow your net worth effectively. Aside from the fact that this property isn’t added to your assets, your monthly mortgage actually brings your net worth down. Consider looking for valuable houses or lots for sale and make that purchase.
Arguably the best and most straightforward method to develop your net worth is to get a promotion. When you get promoted and your salary increases, this will significantly improve your source of income and be added to your personal net worth.
Multiple sources of income
If you can’t get a promotion, then you can always find another source of income. Since net worth is everything you own and not just your monthly salary, having multiple income sources dramatically increases your net worth. Knowing how a business affects net worth is a good place to start.
If your net worth is the total cash value of everything you own, then that means that any cash or money that leaves your wallet or bank lessens your net worth. Instead of spending your money on items that have little to no value at all, consider investing in stock markets or other businesses to grow your assets further.
Finish your debts
Since all your liabilities get subtracted from your assets’ total cash value, then having plenty of debt will significantly decrease your net worth. If you’re still paying for mortgages or student loans, considering finishing them as soon as possible to build your net worth portfolio.
Some of us think that letting our money sit in our accounts is a good thing, as long as we don’t spend it. But instead of just letting it sit there, how does earning money while doing nothing sound to you? That’s possible through stock investment, as long as you know how to do it.
Plenty of people think that marriage will decrease their net worth. On the contrary, getting married can actually help grow it. This is because of the many tax advantages that come along with marriage. Aside from that, combining your assets with your spouse will help grow both your net worth.
While having insurance per se does not really increase your net worth, it can help reduce monetary damages in an emergency. If something happens, instead of having to shell out from your net worth or your cash funds, you may be able to cover some of the expenses with your insurance money and preserve or minimize the reduction in your net worth.
Why Is It Important to Know Your Net Worth?
Knowing our net worth should be a task for all of us who are starting or growing our careers. This will help us identify areas where our money isn’t growing and determine how we can develop our asset portfolio.
In addition to this, plenty of money-loaning services require knowing your net worth, and if your debt is bigger than the total cash value of what you own, it will be fairly difficult for your loan application to be approved.
Your total net worth is not just a bunch of numbers beside your name to make it look pretty. Whether we like it or not, it is an indicator of our success. Knowing how to grow it is an essential part of building our career and cementing our names in whatever path we choose. Always make sure that you note the different methods in increasing your net worth for a better future.