Net worth simply means the total value of everything you own minus the total of all debts you have. What you own can be resumed to your house, your car, valuables that could easily be resold like jewelry) and your debts could be your student loans, credit cards debts and any other amount of money that you need to pay back in the short or long run.
This might seem like an obvious thing, but it’s not and making your net worth bigger should be in your top priorities if you want to reach financial freedom.
Here are 3 practical ways to increase your net worth this year:
Paying off debts
Paying off your debts is one of the first steps towards financial freedom. Pay off the most expensive debt first. By tackling your cards with the highest rates, it will be easier for you to pay off your biggest balances first while continuing small (or minimum) payments on your other credit cards.
Also stop using credit and buy everything cash until you reach the desired stability. This might seem simple but many people are slaves to debt because they spend money they do not have. Cutting your credit expenses will allow you to pay off your credit cards and get back on your feet. This will help you set up a budget and really see where most of your money is being spent.
Take advantage of your rewards by using your credit card points to payoff small debts. Wondering how this works? Simple. It is the principle of earning points without really spending. Want to buy something cash? Use your credit card instead and immediately pay it back with your cash. This will allow you to accumulate rewards without getting into more debt. After, you can change these points into money and pay off other credit card debts.
Improve your income and accumulate CASH
Make sure you have multiple source of passive income. If you want to increase your net worth, it is important that you make your money work for you. Write an Ebook, record Youtube videos, there are many opportunities nowadays to make money while you sleep. Most importantly, spend/Invest your profit wisely. Many people find themselves doing great in business (sales etc…) but broke because they do not know how to manage their cash flow. Don’t just spend less, put the money you save into a savings account in order to allow your cash to build up. Building up cash will decrease your chances of accumulating debt.
Build a cash emergency fund to limit your unplanned expenses
Most people find themselves unable to increase their net worth because they are always paying for “emergencies”. There will always be things happening that are out of our control and this is why we NEED emergency funds. By setting out a fixed % of your income each month to add to that fund, you will build some sort of stability that will ensure your financial security for the cold days. Let the cash build over time by adding small amounts on a regular basis. This fund is there to ensure that life’s emergencies don’t upset your bigger financial plans.
Making your net worth bigger is the best way to transition from “making ends meet” to thriving financially.
Learn more about money management and investment on Shortstints.