What is your net worth? Simply put, your net worth is the economic value of your assets or actual possessions less the economic value of any liabilities or debt you have. In terms of your personal wealth, even if you have houses and cars, the only actual portion of your net worth is your equity, or the portion you didn’t borrow if they were all acquired on outstanding debt. This is your personal wealth.
So how do you go about creating wealth for yourself? There are several paths, but all of these paths require discipline and political will. They’re actually pretty simple, but they’re all a lot easier said than done.
Here are the basic principles:
1. Live within your means.
a. Know what you can and can’t afford and state it as fact.
b. Create a written budget so you can see where funds are going in and out.
c. Avoid incurring and accumulating debt.
i.e. If you already have debt, create a payment plan to clear the outstanding balance as soon as possible.
2. Save and conserve your resources
a. If you make it, you’ll spend less than you earn.
b. Go for cheaper alternatives or reuse things where possible.
3. Plan to multiply your savings and resources.
a. Use savings and investment alternatives according to your risk tolerance.
b. Invest your money in assets that generate income, rather than those that require regular expenses to sustain it.
4. Engage in additional income-generating activities.
a. If possible, try to supplement your current income
b. Assess if it is feasible for you to have multiple streams of income.
c. If it’s both possible and feasible, then approach it with an open mind.
i.e. Prepare to work like a business, not as a hobby, because it actually is.
Deciding and actually living within your means takes a strong determination, a political will not to overspend. And how do you know when you’re actually not overspending? You need to discipline yourself to put in the time and effort to write things down and keep track. With that accomplished, you can now look at how best to leverage the savings you’ve made.
In order to generate additional income, it would also require a lot of discipline and sacrifice on your part. It’s an investment. It takes hard work, determination, motivation and persistence. It’s not a walk in the park. You can look at online alternatives, but be prepared to do some legwork. I assure you it will deliver its returns on time.