Why is it important?
What is Net Worth?
What are Assets?
If I were to ask you what are your total assets right now, do you know? If you don’t know your total assets, you don’t know where you are starting from; you don’t know where you are going or how to get there. Imagine you have decided to take a road trip, in order for your GPS to direct you, it needs to know where you are starting from and where you want to go right? So too with your finances.
So what is an asset?
Most of us were not taught this stuff properly and so end up in money hell. After today though you are going to be among the few that who really understand what an asset is. We need to know the different between an Asset and liability and between income and expenditure.
Wikipedia defines an Asset as “Money and other valuables belonging to an individual or business. Banks define Assets as “Anything you own that can be sold or converted into cash.” No wonder people are confused.
So what exactly is an Asset? An Asset is something that makes money flow back into your life.
So what is an ASSET?
- Investment property: that you get rental income from. This also increases your capital
- Stocks + Shares: you own a small part of other peoples businesses
- Passive Income Business: books you write, music. Online courses, vending machines, car washes. They work for you and bring in money even when you not around.
- You: Your ability to create new things, learn and grow. You are able to bring in more income, so you spend time developing you and learning how to improve your wealth.
So I I want you to have a look through your life and collect the information of your ASSETS
What are Liabilities?
Do you own your life or do you owe it? What do I mean by that? Debt can be overwhelming when you use it to but things that either go down in value (depreciate) or are consumed.
Wikipedia defines LIABILITIES as “A type of borrowing from persons or banks that is payable during over a short or long-term period.
So a liability is something that makes money flow out of your life.
Anything that you are making payments to that have interest attached to it is a LIABILITY. So your:
- Credit card
- Student loans
- Car loan
When you go through your statements, note how many LIABILITIES you have in your life
If you have LIABILITIES in your life you currents have the most powerful wealth accelerator working against you.
A financial detox is the process of giving your wallet some room to breathe. It’s pressing reset on your spending habits. And it’s being more intentional about how you view and relate to money
How do you increase your Net Worth?
Here are some simple ways to increase your net worth:
The less money you spend, the more you can accumulate in net worth. If you haven’t done a budget review lately, look at your current expenses and see if there are places that you can cut back. That includes bigger things, such as getting rid of one of your vehicles if you have multiple car payments, to smaller things, such as skipping lunches out or canceling subscriptions for magazines you don’t read.
Remember, even a few rands here and there can add up to a lot of money throughout the course of a year and longer. Also, consider the costs you have annually that you could downsize.
What annual costs are bringing your net worth number down—and which ones don’t you need? Take a look at things like your insurance and healthcare premiums each year. Compare interest rates and see if any of these annual costs can be trimmed or eliminated altogether. Then, commit to saving and/or investing the difference to add to your net worth.
2. Get Out of Debt
Increasing your net worth isn’t just about accumulating money, but reducing or eliminating what you owe to others. Credit card debt, student loans, car loans, and bonds all count against you when it comes to calculating net worth. You should work hard to eliminate student loan debt, which can’t be discharged in bankruptcy, and focus on paying off debt with the highest interest rates first (such as high credit cards).
3. Invest for Income
It’s important to be smart about the assets you invest in because you want them to grow. This means you should try to put some money into the stock market, which has consistently proven to provide the best rate of return over time. If you’re going to invest in real estate, you need to do your research carefully and be aware that real estate doesn’t always go up in value. And even for money you put into the bank, it’s a good idea to look for high-yield savings accounts that provide the best possible rates of return.
Increasing your net worth can take time
The sooner you put these simple ways to increase your net worth into action, the sooner you’ll start seeing positive results. You can work on growing your assets by increasing your income and making smart investments, and you can work on reducing your liabilities by creating a debt payoff plan and putting extra money toward your debt. It will take time, but it’s well worth the effort as growing your net worth increases your wealth and makes you much more financially secure.