Imagup General Magazine 2024
Millions of retired people, mid-career workers, entrepreneurs, business owners, and others seek reliable, low-risk ways to boost their net worth. There are as many reasons for wanting to enhance a financial profile as there are people who want to do it. The bottom line is that it’s entirely possible to cut debt, increase income, or do both in order to directly affect one’s net worth.
Often referred to in financial literature by its initials, NW, the metric is one of the simplest monetary measuring sticks to calculate, especially for individuals. Take the sum total value of your assets at current market rates, and then subtract all your debt. That’s it. Your net worth is, essentially, what you own minus what you owe.
When working to raise a number like that, you can work on either side of the equation: increase the value of assets or reduce the amount of liabilities. Perhaps it’s easier said than done, but the fact remains that people from all walks of life employ various strategies to ramp up their NW. Here are some of the most popular, and effective, approaches to bolster your NW this year:
Create New Streams of Income
A popular choice for entrepreneurs who already own several companies, creating a new income source is a direct way to raise NW. Even if you don’t own a company or consider yourself a member of the entrepreneurial economy, there are many ways to develop new streams of income. Many people don’t think of getting a part-time job as a form of revenue enhancement or building up net worth, but it’s actually the most common way. Every year, about 35 million working adults take on part-time jobs to bring in more income.
In many cases, they’re not even thinking about net worth when doing so. Most are saving for down payments on homes, trying to fund a college education for their children or simply wanting to build up their savings accounts.
In addition to working more hours, you can bring in extra income by selling some of your assets online. Technically, you are exchanging one asset, a used car, for example, for another asset, cash. An accountant would say you haven’t increased your NW, but a used car is very hard to spend. Thus, cash is a better option, is more measurable and in effect helps increase your usable assets.
Purchase a Home
Buying a house is a clear win-win situation for people who want to cut down on debt and add to their assets. Why? Because if you are currently living in rental housing, your entire monthly payment goes toward a pure expense. In other words, you get nothing but the right to live on the property in exchange for a monthly payment. When you buy a home, at least a portion of your mortgage payment goes toward equity, which means your net worth is getting the benefit of homeownership. Rob, a mortgage broker from TheRobCampbell.com suggests putting as large of a down payment as you can on a new home, as it will reduce the mortgage payments you will need to make down the line. Renting is the antithesis of creating an asset.
Refinance Your Student Loans
An immediate way to raise your NW is to refinance student loans. Not only will you get the added benefits of lower interest charges and longer payback periods, you’ll have lower monthly payments. Refinancing student loans, through a reputable company like Earnest.com, is a perfect example of cutting liabilities and raising cash, an asset, simultaneously. Another advantage for adults in their late 20s and early 30s is this: your credit rating is likely much higher now than when you first applied for a student loan. That’s why you get a lower interest rate and generally better contract terms on the refinance package.
Make Every Dollar Work by Investing
For individuals who have the entrepreneurial spirit, leaving money sitting in savings accounts and low-interest CDs is a losing situation. Likewise, cash in a vault is doing you no good because the money is not working for you. It’s just sitting there, slowly devaluing at the rate of inflation. Cash, according to financial experts, is the least attractive asset to have on your books because it’s constantly depreciating.
Stocks, bonds and other investments usually don’t depreciate over the long-term and are where you should be parking your idle funds. One of the “Buffet principles” involves making “every dollar work for you, every day of the week.” It’s sound advice and is the reason behind the phenomenal growth of stock market investing over the past two decades.
Take Advantage of 401k Matches
If your employer matches your 401k contribution, do whatever you can to put the maximum in each pay period. There’s no better source of free money than an employer match, and you should never let the opportunity pass you by.
Not everyone has access to a wonderful benefit like a full match, but most private companies offer some sort of retirement plan matching, whether it’s 5 or 50 percent of the amount you put in. Experts say you should take advantage of whatever your company offers in terms of retirement plan matching arrangements.
Cut Down on Spending
Perhaps the simplest method for enhancing NW on this listing is the old adage, cut your spending. It’s not only direct and easy to understand but making spending reductions in your personal budget is the fastest way to reduce liabilities.
Most individuals can find some expenses that can be trimmed in order to boost NW. Look at what you currently spend on entertainment, clothing and eating out. Financial counselors say that eating in restaurants, fast-food and otherwise, is the single biggest leak in personal budgets.
Make a Career Change
If you find out that you have the skills to get employment in a better-paying field than your current job, do what it takes to move across disciplines and snag a higher salary. This isn’t about getting an extra gig or a part-time job to earn additional cash. It’s a life-changing move that can eventually bring in a significant amount of additional income. Before making the switch, book a session with a career counselor and find out what your options are.
