Is your net worth what you hoped for? If you feel the overwhelming need for increasing your net worth, then we have compiled this list for you.
13 Proven Tips for Increasing Your Net Worth
Does your current net worth impress you? If no, then maybe it’s time to find how to increase it.
We will look at some simple tips for increasing your net worth. When you increase your net worth, you will be one step closer to financial independence.
Okay, let’s face it. The cost of living keeps soaring with each passing day. In the face of inflation, money keeps falling in value. The $50,000 that you made five years ago cannot afford you the same lifestyle today it would have then. There is a need to keep increasing your net worth.
I like to keep an income opportunity approach to net worth. There are more ways to increase your net worth beyond that though.
How to Increase Your Net Worth
First of all, you must possess a solid financial strategy. Well, if you don’t have one, chances are you’ll never increase your net worth. Before we look at how to increase your net worth, let’s first look at what net worth means.
Net worth is defined as the difference between what you own (assets) and what you owe (liabilities). What you own is the value of all your assets like bank account balances, lands, vehicles, and homes that you own.
You should use Personal Capital to track your net worth completely free. It’s the best way to track it every single day out there.
What you owe include the value of all your liabilities including mortgage and credit card debt. Your net worth is the most straightforward indicator of your financial well-being.
If you want to know how to increase your wealth, then follow these proven ways for increasing your net worth this year.
12 Effective Ways for Increasing your Net Worth
In order to increase your net worth, you should plan accordingly and effectively. Here are some tips for increasing your net worth (effectively) over time.
1. Cut down your spending
One of the best ways for increasing your net worth is to trim your expenses. Avoid buying unnecessary items and things that quickly depreciate in value. Also, make a habit of making a budget and sticking to it. Always have a shopping list to prevent impulse buying.
Well, you do not have to completely abandon your hobbies or stop eating out, but what you need is to become aware of your spending habits and be keener in the areas you need to adjust. A little change can make a huge difference. The money you accumulate when you reduce spending increases your net worth.
Your net worth won’t increase if cash is leaving your account and you are spending on items that quickly depreciate in value or has no cash value.
There are apps that can help you save more money, budget, improve your personal finance and can also help you protect your bank account from fraudsters.
Some of my favorite apps are Personal Capital and Mint which can help in multiple uses. These are completely free and will help you manage your cash flow.
Use cash to make purchases. Research shows that it’s easier to spend more money when using non-tangible money like mobile apps, online transactions or credit cards than when using cash.
That means that you can make purchases that you never intended to make.
2. Have multiple sources of income
One of the best ways for increasing your net worth is to seek multiple sources of income. Do not rely only on your day job if you want to increase your wealth.
There are numerous opportunities to make extra money. Then, you can invest it in growth investments such as dividend growth investments to reap the benefits in the long run.
3. Max out your retirement contributions
A majority of employers offer retirement plans with desirable tax characteristics. You can take advantage of different retirement matching programs to help you increase your contribution.
If your employer provides a 401k or another retirement plan, then there is a good chance that it will also match your contributions up to a given percentage like 3% of the contributions or more.
Also, you can open a Roth IRA which works like a 401k but in reverse. With a Roth IRA, you can invest money that has already been taxed into the account and let it grow until retirement tax-free.
4. Invest in growing assets
Investments are also excellent tools that can help you increase your net worth. If you save your money in a tin or in financial products that are not growing, then you’re losing out.
Invest your money in interest-bearing accounts or in assets that are appreciating in value.
Take the risk so that your net worth will be growing. Consider such investments like the guaranteed investment contracts or the index funds to help you increase your income with time.
If you receive a windfall, then invest it to ensure that you’ll still reap the benefits even in the future (see point #13 below).
5. Review your liabilities
Another way to increase your net worth is to review your liabilities. Find out the amount of money that you owe. Reduce your high-interest debts as fast as soon as possible. Reducing your debts is one step towards increasing your net worth.
Other than paying them in cash where you can, you can also consider refinancing the high-interest loans like student loans and credit cards. Refinancing helps speed up the debt repayment process.
Alternatively, negotiate your debt payment plan with the creditors. Instead of making a single payment monthly, you can also pay weekly or biweekly. This can help you reduce your debts faster.
You can also eliminate the items that you have, and they require more upkeep than the money they are generating for you and instead look for an alternative.
6. Don’t get into debt
Another smart way for increasing your net worth is to avoid obligations unless very imperative. Debts and liabilities significantly reduce your net worth.
When you take out debts, you will spend a lot of your income repaying it and paying the interest. This can substantially lower your assets and consequently reduce your net worth.
Use these creative methods to pay off student loans.
7. Review your assets
Increasing your assets will increase your net worth. So, how can you tell that your assets are increasing? Reviewing your assets is one of the best ways. Assess all your assets and find out if the activities that you’re undertaking are making an impact.
Be sure that your home or primary residence has higher equity. Evaluate the value of the assets that you own and if they will appreciate if you keep them. If they are going to lose in value with time, then you can dispose of them.
Items such as collectibles, antiques, and other artistic items may or may not increase in value. Get professional advice from an appraiser and other experts.
8. Get a partner
Getting married also comes with financial benefits. You can get tax advantages when you are in a dual income household.
The overall net worth increases when you combine your assets as a couple.
Besides, you also get higher buying and investing power when purchasing a home which can further increase your net worth.
9. Buy insurance
Getting insurance is another way to protect your assets against unforeseen disasters. If you take insurance against fire or theft, you can get compensation when unfortunately your asset get consumed in fire or are stolen.
Insurance may cost you in terms of premiums, but it can save you a thousand dollars in the event the asset that you’ve not insured gets in such circumstances.
Here’s a guide to determine how much life insurance you actually need.
10. Get more out of your workplace benefits
If you are employed and your employer offers various benefits, then it pays to make sure that you’re making good use of them. Some employers offer other perks that come with the job. For example, your employer may offer a Christmas bonus and other perks that you can invest when you receive them.
Others provide flexible spending accounts, insurance, and financial literacy programs among others. Take advantage of such things to help you improve your financial status.
11. Talk to a financial professional
Last but not least in our list is finding an experts’ counsel. Sometimes you may not be able to comprehend all the personal financial matters fully. It’s okay to seek a professional financial planner to help you in some areas that you’re having a challenge.
Besides getting an expert, try to read and to find as much personal finance information as possible. You can follow online tutorials, read finance-related books and articles that will help you expand your financial muscles.
Millionaire Mob is one of the best resources that can help you in personal finance matters and can help you find the best retirement option and the best investments to make to increase your net worth.
12. Ensure you aren’t paying too much in fees for investing
I’ve been investing with M1 Finance, which is a completely free automated investing platform that requires no commissions at all. That’s not all though, you may have a retirement account that needs optimizing.
Use a tool like Blooom to optimize your 401(k), Roth IRA and IRA accounts.
Here’s how I saved $3,120 on my retirement fees.
In addition, use low-cost investment brokerages like M1 Finance (which is completely free) to build your portfolio. You shouldn’t have to pay commissions anymore.
13. Compound interest is your (best) friend
Use compound interest to your advantage early. There are many benefits of compound interest, but the most important thing you need to learn is that it takes time to develop.
You need to continually invest and stay invested. There’s not much more to it beyond that.
Conclusion on Increasing your Net Worth
Increasing your net worth is one of the best ways to ensure that you achieve financial freedom.
You can follow these eleven proven tips to help you increase your net worth. Building your net worth takes significant work. It simply doesn’t happen overnight.
Stay patient with your plan for building net worth. If you have a plan up front and stick to it, you’ll do great. Make sure to go out and enjoy yourself in the meantime.
What are some of the things that you are doing to increase your net worth? Share with us in the comments section below.
Other Related Resources
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- Understanding the Financial Issues of Dinks (and how to avoid them)
- Free Stock Calculator: Start Investing Your Money Wisely
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