Five steps to building your net worth: Make 2022 your year of wealth
Upcoming changes to state pension in 2022
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Net worth is essentially all of the money that one has at their disposal, calculated by adding all of one’s assets and subtracting all of their debt. While having a good understanding of personal finances will likely see one’s net worth in the positive, there are five simple ways to quickly and easily boost their net worth.
An individuals’ net worth may not mean much in daily conversation, but creating a wealthy life and luxurious retirement cannot be done without building a solid net worth first.
Prominent business moguls like Elon Musk and Jeff Bezos, as well as investment tycoons like Peter Jones and Warren Buffett all have one thing in common: net worth bought them stardom.
In the modern era, fame is often interlinked with income, as one increases so does the other, provided that one has a disciplined approach to money in that the don’t end up spending more than they have.
Alongside this, building a large enough net worth can gain incredible notoriety for individuals that otherwise may not have achieved it, like the youngest Dragon on BBC’s hit show Dragons’ Den Steven Bartlett who earned his net worth through being an entrepreneur.
With all the positives that a large net worth can bring, many ordinary people don’t pay their own net worth much mind, which is one of the first reasons why they rarely achieve it.
By focusing on trying to build a net worth, and understanding that it takes good practice, money management skills and will not happen overnight, one can greatly increase not just their standard of living but their opportunities, connections and potential.
Step one – Property
Real estate is a great asset to have regardless of one’s financial goals, and making one’s first purchase in the right location can see them set for life.
Many people own a home later in life with the intention of living out the rest of their days within its confines, but little do they know they increase their net worth with every passing month.
Taking on a mortgage does in essence mean taking on debt, however, paying off a mortgage slowly sees one’s net worth increase.
Alongside this, real estate tends to rise in value over time, although this is not always a guarantee.
So, as one’s home gets more valuable, their net worth increases as well as it’s an asset far more valuable than their mortgage debt.
Step two – Sell a business
Owning a business can add as much value to one’s net worth as owning a home but due to their state as an illiquid asset, meaning they are hard to evaluate and often difficult to sell.
Putting a number on a business is far more difficult than doing so on a house, but determining how much one’s business is worth, and how much it could be sold for, can give a good indication of whether their net worth is actually benefiting from them owning it at all.
Step three – Salary increase
As simple as it sounds: increasing income means increasing net worth. Whether this is through paying off debt, saving, investing or simply just earning.
Investing, in the traditional sense, as well as buying other appreciating assets like property with the increased income, can multiply one’s net worth far more than the original salary increase.
Step four- Spend less and pay debts
Many don’t know that their net worth could possibly be in the negative, due to debts such as student loans, mortgages and credit cards.
Decreasing one’s debt automatically increases their net worth, and once all debts are gone they can rest assured that their net worth is in the positive once again.
Alongside this, spending is what initially gets people into debt with items such as credit cards or large purchases like cars, by cutting back on daily and abnormal expenditure one can use that money better through saving, paying off other debts or investing.
Step five – Life insurance
Net worth is not only for individuals but for companies and families as well.
With this in mind, should the sole breadwinner or a major financial contributor to the household pass away the net worth of the entire family drops.
Taking out life insurance is the easiest way to ensure that one’s family can continue living their lifestyle of choice and stay afloat in turbulent times.
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