Do you have a personal finance strategy? A lot of people do not, and if you are one of them, you are catcalling your future doom. If you have a dream of being wealthy, cast it aside. It will not work without a personal financial strategy.
When it comes to financing, you will find yourself worrying about your savings, checking’s and other accounts. While they are all important, the one particular aspect of your finance you should worry about is your net worth. It is your net worth that will determine how much of a successful future you will have.
How? You may ask.
Well, first, you need to understand what net worth means. It is the difference when you get everything you own, including all your assets, checking accounts, retirement funds, and subtract any liabilities such as credit card debt.
By knowing how to calculate your net worth, you will be able to tell just how much debt will affect your future success. If you want to become wealthy in the future, you should not focus only on making more money. You may have a little more money at hand, but the more the money you make, the more the problems you face.
Not to say that earning more money is not a good thing. Instead, you should come up with a good personal financial strategy to help you manage your money in the right way. Only then can you increase your net worth and live a successful life.
Here are five smart ideas you can incorporate to help you increase your net worth.
Take note of your overall Liabilities
Simply put, you need to carefully analyze and detail your debt. It could have a long term effect on your budget. How much do you have in different forms, such as your credit card debt and mortgage? How much loan interest do you have to pay monthly or yearly?
It is very easy to procrastinate when it comes to paying back debt. The costs may accumulate in time damaging your personal finance. Therefore, you need to determine the best way you can reduce your liabilities to help increase your net worth. When you have high-interest loans, you can choose to refinance them if you want to clear off your debt fast.
By refinancing your loan, you can lower your interest rate. However, you need to refinance into an interest rate that is lower than your current rates. It can also help you to change the payment periods to a time you are most comfortable with. You can choose to increase the time to pay out the loan, but you will be risking paying a higher interest. Or, you may choose to decrease your loan payment period by paying higher monthly payments at low-interest rates.
If you have credit card debt, you may choose to refinance it by moving the debt to another card through a credit card transfer. However, you should only do this when you are certain of paying off the debt quickly. It will help you avoid paying any interest but only for a short while. Once the promotional rate ends, you may have to pay more interest.
Still, by dropping the interest, your loan will cease from growing for a while as your debt decreases when you make your regular payments. An alternative plan may be to consolidate your debt. It may be the best plan if you have several debts that you have to clear. Once you combine them into one single loan, you will get a lower interest rate. However, you need to have a clear payment plan for it to work.
Reduce your expenses
Whatever you consider as your expenses will constantly grow, no matter how much money you make. While it may be one of the hardest things to do, you need to cut back on your spending. First, you need to identify everywhere you are spending your money. It may be shocking when you find out.
Once you are well aware of how you use your money, identify the areas you can adjust, no matter how little it may be.
Shy away from personal debt
There is nothing wrong with borrowing money, but if you are not careful, the debt will eat away your net worth. While it may be a wise thing to take on debt when you want to start your own business, you need to be smart about it. A good idea may be to take on a merchant cash advance. Though it may come with an annual percentage rate, you can easily plan on how to pay it back.
There are rules that you should follow when it comes to debt. And one is never to borrow money if you will use it as an expense and not an investment. Purchasing something like a car is considered to be an expense since it will drop in value, and you will still have to pay back the money you borrowed.
Save and invest as much as you can
Do you have a savings account? How much money do you save? One very important rule in personal finance is always ensuring that you feed your savings kitty. How much you save is up to you; however, you have to ensure that for every amount of money you receive, you set aside a part of it.
But saving alone does not cut it. When you save your money, it gives you no value. Rather than saving it only to spend it at a later time, identify investment opportunities, you can put your money to work. However, you need to be wise about the investments you make. Always conduct careful research before making any investment.
If you do not have much information about a certain business, consult those that understand it in detail, and seek their help. There is always a risk in every investment. Still, find ways to minimize the risks to a minimum.
Diversify your means of generating income
Relying on your income alone to pay off your debts, save more money, and still have some for your daily expenditure can be cumbersome. You need to make more money for things to be slightly easy to bear. The best way is to identify ways to create multiple streams of income.
For you to generate more money through various streams, you need to figure out different ways you can generate more value. So how can you do it? You need to learn some new skills that may be of value to other people. You can do so by reading several books or spending time with wealthy people to understand how you can add value to them.
Track your net worth
As you make progress in raising your net worth, it is equally important that you monitor your progress. Keep a record of how you are dealing with your debt as you increase your assets. You can make use of modern technologies to help you make work easier.
By tracking your progress, you will have enough motivation to clear off your debts and increase your assets. You should, however, note that for you to increase your net worth, you need to take action immediately. You should start by building a business that lasts for a long time. When your business has a big market share, so does its net worth increase. Make clear cut strategies you will use to pay off your debt and make smart investment plans.