Building Your Net Worth: How to Make Yourself Worth More

Everyone wants to be more financially stable. Whether you’re already well-to-do or you’re struggling to get on your feet, financial health is a goal that everyone shares.

One of the most important aspects of achieving optimal financial health involves boosting your net worth. This not only allows you to better enjoy life in the present, but it also means that you can go into the future without fear of not having enough money to enjoy your retirement.

Understanding what the term net worth means is the first step in understanding how to increase yours. The term net worth refers to the difference in your assets and liabilities.

For instance, if you have $100,000 in assets and $75,000 in liabilities, you have a net worth of $25,000. If your liabilities are higher than your assets, you have a negative net worth.

Regardless of where you stand in your financial journey, you can improve your net worth, and it’s a goal that everyone should share. Today, learn more about some tips for growing your net worth so you can live with less financial stress.

Increase Your Income

How many times have you thought that if you could make more money, you wouldn’t be as financially stressed? It makes sense, doesn’t it?

Money is a limited resource that we have, and if we had more money, we wouldn’t be as limited in what we can buy and how much we could invest. While it may seem like it’s easier said than done, there are several ways that you can boost your income which will help you achieve your financial goals and boost your net worth.

One of the easiest ways to boost your income is to ask for a raise at your current job. Obviously, this is easier in some cases than others, but if you go to your bosses with a detailed list of reasons that support your request, you may be able to earn more money without having to pick up any extra work.

Speaking of picking up extra work, if your boss turns down your raise request, don’t get mad and quit your job (unless you can find a job that pays more).

Instead, consider picking up some sort of side hustle to supplement your income. This doesn’t mean that you have to work two jobs for the rest of your life, but when you add income, you can pay off some debts faster, which allows you to get your assets higher than your liabilities.

Finally, consider investing in yourself by furthering your education or picking up more certifications in your current industry. Increasing your income doesn’t always have to be a short-term goal.

In some cases, you can set yourself up for long-term financial success by furthering your education and putting yourself in a position to make more money a year or two in the future.

Living Below Your Means

We like to enjoy the fruits of our labor, and there’s certainly nothing wrong with that. However, living beneath your means allows you to save money faster than you spend it.

The entire concept of living below your means revolves around not buying all the things that you can technically afford so you can put money aside for the future.

For instance, even if you can afford a new car, but your current vehicle is running fine and has a low payment, living below your means dictates that you keep driving the dependable car that doesn’t cost much money, even if you can afford to buy a new, fancy car.

Start the process of living below your means by creating a budget so you can get a better idea of how much you’re spending and how you’re spending your money. This allows you to identify some areas where you can cut back.

Cutting back or “tightening your belt” doesn’t mean that you never enjoy your money, but if you’re going out to dinner four times a week, cutting back to twice a week is a good way to live below your means and save some money each week. Reducing the amount that you’re spending so you can save or invest it sets you up for long-term financial success.

Invest

Investing is one of the most important, effective ways to increase your net worth. While saving is important, most savings accounts don’t generate enough interest to make a huge difference.

Also, building an emergency fund of cash, while important, doesn’t allow your money to make money, and that’s an important aspect of boosting your net worth.

Spend some time educating yourself about different investment options and choose the one that seems to be the best choice for you based on your feelings about risk and your personal goals. It’s also a good idea to speak to a financial advisor to better understand how to use your money to make more money.

When investing, be sure to diversify your portfolio. That’s a basic principle of investing and helps protect you in the event that one sector struggles. The key to being a successful investor is time in the market, which means you need to start soon and stay as long as possible.

By taking a consistent approach to investing and working with professionals who are experts in the field, you can turn $1 into $2, and that adds up quickly.

Attack Your Debt

Remember the definition of net worth and how it is the difference between assets and liability. Your debt is a liability, so the more that you can shrink it down, the higher your net worth can go.

When you take an aggressive approach to your debt, treating it like the enemy of your finances. There are several strategies that you can use to attack your debt, and the path that you choose depends on a number of factors.

Many people choose the debt-snowball approach, which involves paying off your smallest debts first and then using the money that doing so frees up so you can pay off larger debts.

Many of the strategies that we’ve discussed today are built around the long-term increase of your net worth. While paying off all your debt may be a long-term goal, wiping out those smaller debts is a great way to have a positive impact on your net worth in the short term.

Create an Emergency Fund

One of the biggest mistakes that people make when increasing their net worth involves ignoring the need for an emergency fund. It seems counterproductive to build up an emergency fund of $1,000 and just leave the money sitting there.

While it’s tempting to take that money and invest it, having an emergency fund on hand allows you to avoid derailing your pursuit of a higher net worth.

51% of Americans report that they would not be able to pay for a $1,000 emergency without using a credit card. Since debt is the enemy of net worth, it’s important to build an emergency fund for yourself. This allows you to buy a $200 battery for your car without having to use a credit card.

An emergency fund means that you can buy a cheap washing machine if yours breaks down, allowing you to avoid paying to use a laundromat. Your emergency fund is a powerful tool in your pursuit of a higher net worth.

Grow Your Net Worth

As is the case when you’re building anything, building your net worth takes time and commitment. Even when it feels like nothing is happening and you’re not making progress, remain committed to your plan. It’s also important to be adaptable.

Even if your boss approves that raise that you request, don’t be afraid to look for ways to supplement your higher income while you can.

Building your net worth is not going to happen by accident. However, when you make deliberate decisions and strive to put yourself in a better financial position, you can reap the benefits for years to come.