8 Steps To A Higher Net Worth in 2022
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In our modern world, access to multiple loans is relatively easy; making it difficult to live a debt-free life. Many people keep spending on credit; living above their income. This continues until suddenly, they discover that they are neck-deep in debts and their net worth is either negative or very low. This is often indicated when their credit limits are reached on multiple credit cards.
The sudden realization that the huge debts were incurred from vacations, trips, and holiday expenses funded with credit cards lead to despair. With no assets acquired and huge debts, the net worth of such individuals will be negative. Even more frustrating is the fact that they can no longer fund their lifestyle and passions.
This often leads to anger, frustration, depression, and even suicide. The good news is that nobody has a fixed net worth. With the right steps and discipline, you can reduce or pay off your debts and substantially increase your net worth.
In this review, we will explore up to 8 steps that you can take to improve your net worth this year. Then, we will explain the meaning of net worth in detail. Lastly, we will describe the best forex training course on the internet that can help you improve your finances via forex trading.
Table of Contents
8 Steps to increase your Net Worth in 2022
#1. Update your Budget
A budget is a plan showing projected income and expenditures for a specified time. Many early-career workers ignore budgeting and keep on acquiring credit cards until they find themselves in huge debts. It pays to always have a comprehensive budget that will be regularly updated.
At the beginning of a new year, many people prepare new year’s money resolutions and outline their financial goals. But, implementation is always the problem as it is always difficult to stick with the budget. If you want to increase your net worth, then you must regularly update your budget and track your expenses to ensure strict implementation.
If you find it difficult to frequently analyze your expenses, you can download a free credit tracking app on your phone to help out. Many free and paid personal finance apps are available on the internet. A good app will keep track of your income and expenses, then compare them to your monthly budget to determine your level of compliance.
#2. Boost your Savings
If you do not have a savings account, it is time to approach a financial institution to open one. Most times, savings accounts double as a personal emergency fund in case of unforeseen circumstances that requires money. Borrowing from yourself to solve a financial problem is a good practice. Note that this particular savings account must be different from your flexible spending account, investment account, or holiday savings account.
Thanks to the internet and modern technology, you can start a side hustle on the internet to boost your income and savings accounts. Research shows that gig economy earners make enough money to cover their monthly expenses while saving their primary income. The gig economy refers to the labor market dominated by freelancers and short-term contracts instead of the traditional full-time jobs.
Check your previous expenses and bills for the last few months or quarters. Is there a recurrent subscription or unnecessary bill? Can you pinpoint any habit that is cutting deep into your income? For example, do you often dine out, buy expensive drinks at bars, shop a lot, or frequent movie houses? It is time to cut down on some frivolous expenses, grow your savings accounts and improve your net worth.
#3. Pay Off Debt
Apart from the psychological stress that comes with multiple debts, it affects your ability to save and adversely affects your net worth. So, one of the first steps to take in improving your net worth is to pay off your debts.
There are standard methods of paying off debts that you may adopt. The Debt Snowball method suggests paying off the smallest debts first while paying the minimum payments on other debts.
The debt Avalanche method focuses on paying off the debt with the highest interest rates while maintaining minimum payments on other loans. You might consult a financial adviser to let you know the best method to choose.
Whichever method you choose, reducing your overall debt burden by paying off the debts as soon as possible is a great way to increase your net worth. Student loan debt, mortgage, credit card debt, personal loan; indeed all loans come with interest fees. Most times the cumulative interest fees exceed the principal amount collected as a loan.
Credit card debt is usually a high-interest debt, so paying it off quickly will help you to save money and improve your net worth. But some financial advisors postulate that Mortgages come with low-interest fees and so should be the last debts to be paid off.
#4. Increase Retirement Contribution
Retirement and old age are inevitable, so you must be prepared. The earlier you start planning for retirement, the better your chance of financial improvements, peace of mind, and higher net worth. If you are self-employed, consult a certified financial planner to guide you on how best to plan for retirement and financial freedom.
If you do not have a retirement account, endeavor to get one because it has many benefits. If you already have an employer-sponsored retirement account, increase your contribution to the account. An individual retirement account is considered an asset that counts as part of your net worth. This is because you can withdraw cash from it once you attain the retirement age.
Employer-sponsored retirement plans are great because the company contributes part of the pension while the employee contribution is deducted from his salary. This makes the account grow faster. Retirement accounts are tax-efficient and the interest is high as it compounds over the years while you wait for retirement.
#5. Invest in Yourself
One of the best ways to boost your net worth is by investing in yourself. The advantages are numerous; it may lead to better job opportunities, more income, good health, psychological confidence, etc. Investing in yourself means spending time, money, energy, and other resources to acquire skills that will improve your life and align with your future goals.
For example, you may pursue further studies which upon graduation will boost your profile and qualifications. It may also give you chances of getting high-paying jobs. You may enroll for online training and certifications which will likely increase your income or competency in your current job.
Another way of investing in yourself is by starting a new career. With the advent of the internet, there are abundant opportunities to learn new things on your own. For example, you may start learning computer programming by purchasing online courses, eBooks, and videos. Many web and graphic designers are self-taught; you can do the same.
Many people also buy and read inspirational books that challenge them to become better managers, investors, public speakers, or even better parents and partners. These books may help you create goals to improve your network, and presentation skills or have better relationships with other people.
For example; assuming you decide to read, learn and follow one of the health benefit programs which focuses on healthy diets and exercise. You may be reducing your medical bills, and improving your physical fitness, confidence, and memory.
#6. Lower your Tax Bill
If you can find a way to reduce your income tax and other taxes, you may improve your net worth. Sometimes, the amount of tax payable depends on the computation system used. It is better to use a tax advisor or tax software to find out how best to lower the tax bills.
Tax credit refers to the money that can be directly subtracted from your taxes. It is usually given by the government to help its citizens. Always take advantage of tax credits and tax breaks when eligible to receive them. You need to actively search and familiarize yourself with the particular tax situation and updates in your environment. For example, you may be eligible to receive the child tax credit, student loan interest deduction, earned income tax credit, home office deduction, etc.
Your location or method of savings can significantly reduce your obligations and increase your net worth. Different states or countries have different tax laws. You can move to cities with lower tax requirements or put your money in tax-advantaged accounts. There are special savings accounts that offer reduced taxes and higher interests. You can explore these options.
#7. Improve your Career
To improve your career, the first thing you need to do is to have a plan. Draw your career roadmap, and set your goals. Define your current position and where you want to be in the next five, ten, or fifteen years from now. List out the steps required to achieve each milestone as well as the commitment required.
Start with the first career milestone and break it down into subsections. Consider the actions to take immediately and in the future; for example monthly, quarterly, etc. Which courses or skills should you learn? Are the goals achievable with your current job? You may seek guidance from your supervisor, colleagues, superior, or even online forums and groups.
In the quest to advance your career, do not forget to network with people you meet online and offline. Apart from advice and feedback, you may be exposed to future job offers, inspirations, or even partnerships to startup your own company. Remember, most entrepreneurs started as employees before launching their own companies. The highest net worth individuals in the world are entrepreneurs; not employees.
#8. Audit your Insurance
Our inability to see the future only means that we must be proactive and prepare for financial emergencies. This is why we buy insurance policies. Insurance is indeed a big business as many people buy health insurance, car insurance, life assurance, house insurance, etc. When it adds up, you will discover that insurance premiums are not cheap.
If you want to improve your net worth, you will have to find ways to reduce your insurance bills. Check all your policies and analyze them carefully. Search for insurance companies with lower packages or premiums. It may be a good opportunity to change to a new insurance company.
An insurance deductible is an agreed sum or percentage of your insurance claim that you have to pay before the insurance company pays the remaining balance or their limit. For example, you can explore health insurance deductibles if you are healthy. You will only pay part of your medical bills anytime you visit the doctor.
Many people pay insurance bills monthly but seldom have car accidents, property damage, or medical bills. So, exploring insurance deductibles is a great way of reducing your insurance bills.
What is Net Worth
The Net worth of an individual or company is calculated as the difference between the total assets owned and the total liabilities owed. It reflects the actual economic status of an individual or the financial equity of a company.
For individuals, assets simply mean anything that you own that can be converted into cash; like a house, car, bank account, investments, etc. On the other hand, liabilities mean your debts and obligations such as mortgages, student loan debt, credit card debt, etc.
Positive net worth means that your assets are more than your liabilities while a negative net worth means that your total debt is more than the total cash and properties that you own. Knowing your net worth is critical to estimating your financial health. It tells you if you will be able to afford emergencies, pay your children’s school fees or retire without worries. In fact, it expresses your exact financial position.
If you constantly calculate your net worth, it will inform your financial decisions and help you reach your financial goals quicker. You will be tracking your personal finance and avoiding unnecessary expenses. For example, you will know when it is time to save more money, take a vacation, or perhaps schedule expensive medical procedures.
