Have you ever sat there and thought ‘how do I increase my wealth’ or ‘how do I increase my net worth’? If you have, than you are not alone. We all think about how to increase our net worths from time to time. But very few put those thoughts into action. So below, I have listed an easy 4 step guide to increasing your net worth.
1. Get out of debt
To me, this is the single most important thing when it comes to building wealth. Debt is the number one wealth killer. If you have debt, it means that you are not banking all the cash that comes your way. Instead, you are using a significant portion of your earnings to service those eye waveringly high interest rates.
The satisfaction of keeping 100% of your money is truly great. But by having debt, you are essentially working for the credit card companies and all the other people you owe money to. So pay off the bad debt.
Not only does eliminating debt increase your net worth, it also makes it easier for to further r increase your net worth by other means because you’re no longer burning money up with interest.
For example, for every £1,000 you owe at 10%, you’re losing £100 per year to interest expenses. This means you actually have to pay £1,100 just to make your net worth budge £1,000! This is crazy!
On the other hand, say you invest £1,000 at 8%, you’re gaining £80 per year. The net worth difference between a -£100 drag and a +£80 boost is £180. This means that a debt-free person is already almost £200 ahead for every $1,000 in the net worth game than a person that has debt. This is obviously super simplified math for the purpose of example only, and real numbers will be different due to things like compounding and monthly payments, but the logic still stands. No matter how you cut it, being in debt is expensive!
2. Increase Your Income
Increasing your income is one of the easiest ways of increasing your net worth. This may seem obvious, but you’d be surprised how many people think they can “get rich” on tragically small salaries. Saving 20%+ of your income is fantastic — but it won’t catapult your net worth into the stratosphere if you’re only bringing home £1,000 per month.
There are a number of ways to increase your salary with one of the best being negotiating your salary. I find it amazing how much effort people in this country give to trying to negotiate their salary. It practically non existent. Wouldn’t it be brilliant to make more money to do the job you’re already doing?! That what negotiating a salary gets you.
Another way to increase your salary is to pick up extra skills and qualifications. In todays world, there should be no excuse for not giving this a go as the internet has made things much more accessible.
You can also add to your income by doing side hustles. A side hustle is a way to make money outside of your 9 to 5 job. It is any kind of part-time work that lets you bring in extra money on top of your day job. This can be anything from freelance writing to Ubering to selling stuff on eBay. Even something that brings in as little as £50 per week will add £2,600 per year to your income.
3. Increase Your Savings Rate
You can only increase your net worth at a rapid pace if you’re saving a high percentage of your income. A person earning £30,000 a year and saving 20% of their salary will increase
their new worth at a far greater clip than if they only had to save 10% a year. It is basic maths.
Most financial advice will tell you to save 10% of your take-home pay, but I personally think you need to save way more. The number I have in mind is 30%. This may seem insane but it can be done. The task becomes less daunting when you create a proper budget. Have a look at the save money section of this site to see how you can increase your savings rate.
4. Invest your money
With all things in life, if you want it, you have to buy it. You want a new laptop? You have to buy it? You want new shoes? You have got to buy it? Want a vacation? You have to spend money to get it? So why don’t we have this same attitude when it comes to money. Why don’t we just buy more of it?
This is basically what investing is. You are spending money today to have more of it in the future. We can simply buy more money.
So in order to grow your money exponentially, you will need to learn how to invest and make your money work for you. You need to use your money to buy things that make you more money.
So there you have it, 4 basic steps to increasing your net worth. Increasing your net worth is simple but not easy. It requires discipline and commitment. And for those that are able to commit, they will surely be rewarded.