Wednesday, February 6, 2013, AM | 1 Comment
Knowing your net worth is important, as it can mean many things. Basically, it is the yardstick by which you can measure your personal financial success in the years to come. The higher your net worth, the better future you can achieve. Of course this only works when you are able to increase or at least maintain that net worth.
Many people, especially business-minded folks, have calculated their net worth and come up with the verdict that it needs improvement, but doing so will certainly be difficult. However, one really only needs some expert guidance and personal determination to be successful. Here’s what you’ve got to do.
Pay Off Debt
The more money you owe, the smaller your net worth. Pay off all your outstanding debt, including credit cards and loans, as soon as possible. However, take note of the penalties that could be incurred for early payments, such as in the case of mortgages.
Determine high-interest debt and aim to pay those first, which ultimately ends in paying off a lesser sum of debt in the process. Debt consolidation is a viable option to pay off debt too. This involves taking out one loan or credit card to pay off multiple debts you owe. This is a wise strategy, as it lessens the interest rate accruing over time.
Maximize Retirement Contributions
Both the federal government and private employers offer retirement schemes that bring ideal tax features. In fact, most employers have comparable programs that help its employees grow their contribution quicker. By not capitalizing on these available programs, you are not necessarily leaving cash out on the table.
Retirement contributions produce a two-fold advantage. They defer your taxable wage to your lowest earning period and raise your accessible generative assets.
To cut costs, you need to identify them. The hard reality for most people is that they don’t like to hear that they spend too much. Eating in flashy five-star restaurants or buying the latest gadgets to come out of the market almost every year is not a financially wise decision and should be stopped immediately.
And while these big ticket items remain a problem, many consumers don’t realize how fast smaller expenses can add up. Always make it a point to note your daily expenses. If you find your weekly expenses exceed your income, then it’s time to cut back.
Invest Your Savings
Don’t leave it in your piggy bank or an ordinary savings account. Put your money to good use while you don’t need it. The simplest way to invest your money is to put it in a time deposit account, so that it grows interest every year. That’s just the beginning though – with the proper advice, you can turn your money into more money very easily.
While you may think a car is an asset, it’s not. Rather than increasing in value, cars and other liabilities decrease in value over time. You’ll likely spend more than you gain from these purchases. A household, on the other hand, is an asset, especially those who are sitting on prime land. Be wise with big purchases – always keep an eye on the big picture.
Consult a Pro
This is an important, yet often disregarded step. People perceive consultation services from an accountant or financial adviser to be a mere expense, rather than an investment. On the contrary, you will learn a lot from a onetime discussion with these experts and in all likelihood, profit from their services. You don’t have to risk it all – if you’re a slow and steady type, they can and will still work with you.
To be clear, increasing your net worth is a goal you cannot accomplish overnight. It demands cautious planning and the devotion to see your plan succeed. Though it does seem hard, it will pay off in immense dividends with a financially secure present and rewarding future.
Jackson Hyatt writes about investment, business and education. His most recent work chronicles his journey earning a human resources MBA. <http://www.humanresourcesmba.net>