Tuesday, 4 January 2022

How to increase your net worth in 2022



As a start, you must know what is your net worth. To calculate your net worth, you need at add all the value of your assets and minutes out all your liabilities.


Net worth = Assets - Liabilities

Method 1

The first way of increasing your net worth is to increase your assets. What are assets? Assets are things that you own that increase in value over time, or things that you own that earn income for you.

Assets that increase in value includes properties (like the home that you are staying), limited edition collectibles. Assets that earn incomes for you includes securities such as shares in publicly traded companies, fixed deposits, rental properties, intellectual properties, etc.

You can either save and invest, buy, or you can produce it yourself. As long as it belongs to you, these assets will generate some incomes for you.

• Caution: please do your due diligence before buying anything. Remember that all investments will have done risks involved.


Method 2

Another way to increase your net worth is by reducing your liabilities. Liabilities are things that you buy with credits and would need to pay back with interests. Things that you own and depreciate over time are also a type of liabilities.

Debts are what we get when we buy things in credit. And usually, we would be using credit card, personal loans, mortgages and car loans to pay for what we are buying. Eventually, we would need to pay for the credits plus interests. The amount of interests that we are paying will depends on the time we choose to pay off the credits. It also depends on the interest rate of the debts. The higher the interest rate, the more that you will need to pay for it.

So, if you have a high interest rate debt, the more you pay it down, the more you will save in interest rates. In another way, it means that you are earning more because you are paying less.

When you reduce your debts, your are reducing your liabilities and at the same time, increase your net worth.

Method 3

The third way of increasing your net worth is by saving up. By reducing your expenses, you are effectively increasing the numbers of ringgit available to invest and increase your assets. But be cautious not to overly deprived yourself by cutting off everything. Give yourselves some rewards. Reduce spending on what is not necessary but keep those that keep you moving and happy. Be truthful to yourselves on this.

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