Last updated Feb. 21, 2023 by Peter Jakes
Your income level largely determines the lifestyle you live; those with a decent income tend to live a more comfortable life because they’ve acclaimed financial independence to a large extent. Therefore, you must keep growing your income so that you’ll have money set aside to cater for “rainy days.” And having a decent net worth is one good way to go about it.
Those with a net worth of $100,000 or more live in a good financial state. However, growing your income to get to this standard can be quite difficult. Notwithstanding, we’ve come up with easy ways to increase your net worth by $100,000. Most of the advice provided here is practicable, and with time, consistency, and patience, you’d find yourself on the right track to financial independence.
Net worth is the estimated value of the assets of a person or corporation subtracted from the liabilities they owe. Simply put, net worth is everything you own minus all that you owe. It is an essential metric to gauge an individual financial status, providing a useful overview of their current financial position.
A high net worth refers to good financial health and, ultimately, a good credit rating for a person or a company. On the other hand, a low or negative net worth refers to weaker financial health and a lower credit rating, hence directly affecting the person or the company’s ability to raise funds from the market.
Knowing your net worth is crucial because it can be an important gauge of your financial status. When tracked yearly, net worth can indicate if a person or a company is making progress in improving their financial well-being.
The basic formula for calculating net worth is ASSETS minus LIABILITIES = NET WORTH.
In essence, to calculate your net worth, simply take inventory of what you own and your outstanding debt. By what you own, we mean include assets that you’re still paying for, such as a house or a car. For example, if you own a mortgage on a house having a market value of $250,000 and the balance on your loan is $200,000, you can include $50,000 in your net worth.
Not that your income is not added to a net worth calculation. An individual can collect a big monthly paycheck but still have a low net worth if they spend most of their income. On the other hand, even those with decent incomes can accumulate a significant net worth if they buy appreciating assets and are prudent in saving.
Once you’ve calculated your net worth, you can develop a plan to increase it steadily. This can be done mostly by saving more money, growing your investments, and paying down debt. Note that net worth isn’t calculated to compare financial status against others but to help you gauge your progress toward improving your net worth from year to year.
Debt is like a stone tied to your leg, slowing you down in your aim to achieve a financial breakthrough. And to improve your net worth, you need to attain some level of financial independence. Therefore, there’s a need to cut off debt.
It is the money you owe that could be used to grow your net worth. So start by paying off all your debt as soon as possible. However, when doing so, be aware of penalties attached to early payment (like with mortgages).
A good strategy is to consolidate your debt by taking out a lower-pay paying down high-yield debt. In essence, know what you owe and devise a plan to pay it back. You can also make extra payments where possible and work to minimize your overall debt burden.
Increasing your net worth requires some level of sacrifice, such as trimming your expenses, but in the end, you’ll see that it is worth it! The less money you spend, the more your chances of accumulating in net worth. Tracking your spending is a great way to cut expenses. You can start by reviewing your budget and fishing out unnecessary expenses eating up your finances.
Also, you can cut down on “smaller” expenses, such as terminating subscriptions for TV shows you don’t watch or eating out. And if need be, you can save your launch money, snacking, and/or beer. Though these small expenses may not be noticeable, it adds up and eats at your finances, preventing you from achieving your goals.
Remember that even a few dollars here can add up to a lot of money in the long run. So consider the monthly costs that you could downsize. What monthly costs are bringing your net worth number down? And which ones don’t you need?
Then evaluate essentials like your insurance and healthcare premiums per year. Finally, compare the interest rates, and see whether you can trim any of those costs or eliminate them. Then, you can commit to saving and/or investing them in addition to your net worth.
Having a savings account is an incredible way of boosting your net worth, so if you don’t have one, you have to open one immediately. Besides, your savings can serve as your emergency fund. First, however, you’ll need to grow it so that if an emergency arises, you’ll be borrowing money from yourself instead of a bank. Doing this will reduce your chances of taking debt and will, thereby, improve your net worth.
Furthermore, your savings account helps you to manage your cash flow and settle unexpected expenses, such as a major health challenge, without having to dip from a personal loan. So as you map out your budget, don’t forget to allocate a certain amount towards savings. The amount you’re able to save at the end of each year will, to a large extent, affect your net worth.
Therefore, you’ll need to find any means possible to boost your savings. You can try working extra hours for extra pay or doing a side hustle. In addition, you can direct any “free” money you get in the course year to your savings account.
Furthermore, having a savings account with high-interest rates will make you money even while you sleep. These accounts typically carry federal insurance of up to $250,000, making the funds safe. In addition, the money can earn interest over time, and you’ll have access to your cash when you need it, whether through direct withdrawal or a fund transfer.
Another way to increase your net worth by $100,000 is to build an emergency fund. An emergency fund is cash set aside to cover urgent needs such as sudden health issues or automobile emergencies. However, they can also cover other expenses like home-appliance repair or replacement, unemployment, unexpected travel, and family emergency.
An emergency fund can help you stay financially afloat without having to depend on any other money, especially high-interest loans or debt from credit cards or personal loans. The amount you set aside for your emergency fund depends on your financial capability.
For a start, it’s best to pursue a lower milestone, like saving $500. And as you can afford to save more, keep working your way up and strive to reach half a year’s expenses before contributing money toward your retirement.
Many private employers typically offer 401(k) retirement accounts that offer great tax benefits for saving and investing your money. For example, many employers offer matching programs that will help you to increase your contribution while building your wealth faster than you could on your own.
In addition, you have other tax-advantaged accounts available to you, such as Traditional and Roth IRAs or individual retirement accounts. Taking advantage of these accounts help keeps money invested for the long term through stocks, mutual funds, and other investment options. Moreover, it will grow in value and build your savings balance as you retire.
Likewise, using these accounts will save you tax expenses while investing your income for the long term. You can use these employer-matched funds to boost your retirement contributions and grow your income by getting more money to save. However, if you choose to ignore such programs, you’re leaving money on the table.
Retirement contributions have two primary benefits. First, traditional retirement accounts allow you to defer your taxable income to the lowest earning years in retirement. And second, it acts as a way to grow your available investment assets.
The more skillful you are in your lane of hustle, the more your chances of getting more opportunities that’ll increase your earnings. And an increase in earnings will translate to an increase in net worth. Moreover, you can ask for a pay raise or a promotion at work if you can work on improving your skill set.
Another idea is to get a new job, a job that pays more and can afford you a better chance to boost your income. Never settle for less; if you find a better opportunity to increase your earnings, apply for it, and don’t be embarrassed to quit your current job if hired.
In addition, you can also do other high-paying side-job that requires special skills like graphics designing, freelancing, photography, etc., to supplement your income. You can also work towards getting promoted at work and thereby earning higher pay.
You can also consider freelancing or doing something you enjoy as a side hustle but as your main source of income. However, the con is that working as a freelancer most likely means that you won’t get any added employment benefits such as health insurance or paid time off. Nonetheless, you can receive higher pay or compensation to cover this.
The saying that “health is wealth” is entirely true. You cannot improve your finances or even earn with poor health. Therefore, as you work on improving your net worth, do not be too busy taking care of yourself. So as you make money, ensure you go for regular checks, eat good food, and exercise.
In addition, do not overwork yourself to earn more money to boost your net worth. Always monitor your body, and when you notice any slight challenge, don’t hesitate to see the doctor. Some people with poor finances are often associated with poor health, so instead of building their wealth, they’d be spending money on their health.
Paying off your debt, minimizing your expenses, saving more and spending less, and building an emergency fund are common ways of increasing your net worth. However, increasing your net worth takes time and dedication. And adding to your income stream, such as taking a side hustle or gaining a promotion at work, is another good way of building your net worth.
Saving, building an emergency fund, and investing your money are some of the fastest ways to increase your net worth. However, your net worth cannot grow overnight; it will take time and effort. So how fast you grow your net worth also depends on how committed you are towards the process.
The average net worth of people between the ages of 25-29 is $49,388. And for those between the ages of 30-34, their average net worth is $122,700. Job type, financial status, and amount in savings are some of the determiners of net worth.
Net worth is a combination of what an individual owns (assets) and what they owe (liabilities). Knowing your net worth is essential for two reasons: First, it helps you know your current financial situation. And secondly, it gives you a reference area for measuring progress toward your financial goals.
What are 3 ways a person can increase their net worth?
The three (3) ways a person can increase their net worth include cutting down on expenses, boosting retirement savings, and paying off debts with high-interest rates.
What increases a person’s net worth?
A person’s net worth increases when loans and debts are paid off. Hence, the major factor that decreases your net worth is the credit card loans and debts you owe.
What is Considered High Net Worth in 2022?
In 2022, a person is considered to have a high net worth when their financial assets is worth more than one million dollars in liquid form.
What is Easiest Way To Increase Net Worth?
The easiest way to increase your net worth is by paying more into your pension fund, reducing your daily expenses, paying off debts, and investing in assets.
Other ways to increase your net worth is by starting a profitable business, seeking high paying jobs, creating a budget, and by saving.
How To Determine The Net Worth of a Person
To determine your net worth, subtract the worth of your assets from the sum of all that debts or financial obligations.
In order words, a net worth of a person is the difference between what you possess and what you owe.
You have a low net worth when the amount of debts accumulated is greater than the sum of all the assets you possess. A large net worth is determined if the amount of assets you possess is more than the amounts you have in debts.
What is a Negative Net Worth?
If a person’s entire debt is more than their total assets, this will result in a negative net worth.
An individual’s net worth would be negative if the entire value of their debts, which include credit card bills, energy bills, overdue mortgage payments, vehicle loan bills, including student loan bills, is larger than the value of the cash and investments they possess.