thinks to do become rich
Know Your Net Worth
Net worth can seem like a tricky topic, but it’s quite simple. Your net worth is how much money you are worth. If you were to sell everything you own, then pay off everything you owe, how much money would be left?
That’s your net worth.
Here’s what that looks like in equation form:
Net worth = Assets (what you own) – Liabilities (what you owe)
Ready to calculate your net worth? Here’s how:
First, create a list of all your assets (what you own) and their estimated value. Here are some examples of assets:
At the bottom of the list, add up the total value of all your assets.
Next, create another list of all your liabilities (what you owe). Here are some examples of liabilities:
Credit card debt
At the bottom of the list, add up the total value of all your liabilities.
Now that you have the total value of your assets and liabilities, plug the numbers into the equation above, and you’ll get your net worth.
If you have a positive net worth that’s good. Continue working to increase your net worth even more.
If you have a negative net worth, you need to take a look at your budget and come up with a plan to increase your net worth. If you’re young and you have a big student loan, you shouldn’t worry too much as you haven’t even started working yet.
Make sure to re-calculate your net worth every month or so to keep up to date with your finances. I use a free tool called Mint to track my net worth.
Investing is one of the best ways to increase your net worth, but a lot of people stay away from it because they’re scared of losing money. So instead of investing, they keep their money in a savings account. That’s great, and you should have some money in a savings account for emergencies, but the truth is:
Money in a savings account loses value over time.
See, the average savings account has a very tiny 0.06% APY (annual percentage yield), while inflation is around 1.7%. That means that each year, the money you have in a savings account is going to have less and less buying power.
So, what can you invest in to stay ahead of inflation? Here are some options:
Exchange traded funds (ETFs)
CryptoCurrency (crypto can be volatile, so invest at your own risk)
Related: 20 Passive Income Sources to Make Money While You Sleep
Communicate With Your Significant Other
Notice how I wrote significant other; this financial tip doesn’t just apply to married couples. Money fights can affect any relationship.
The best way to avoid fighting about money with your S/O is to talk to them about it. Remember that you’re a team! You should be talking to each other about your financial goals, and you should set a date once a month to go over your finances together.
Don’t let money ruin a great relationship.
Side Hustle to Make More Money
Are you happy with the amount of money you’re taking home each year? If you’re like most of us, a little bit of extra cash each month could go a long way.
So, why not start a side hustle to supplement your income?
Don’t worry. You don’t have to sacrifice all of your free time to start a successful side hustle. One of the big advantages of side hustling is that you can do it when you want and as much (or as little) as you want.
The best advice I can give you is to start. Use any extra time you can find and make a little bit of progress every day. Soon you’ll be addicted to the side hustle lifestyle.
So, how much money can you really make with a side hustle?
Well, that’s the other awesome thing about side hustling, the income is virtually limitless. Since you’re not getting paid by the hour or a set salary, it’s really up to you to decide how much you want to earn. The more you feed your side hustle, the more it grows.
Related: 15+ Superb Ways to Make Extra Money on the Side
There you have it, the personal finance basics laid out in 12 simple points. Now I’ve got a question for you:
Did you learn anything new from these personal finance tips and tricks?
If you did:
Take action. Start working on improving your finances today, not tomorrow.
It’s easy to read these tips and think, “Oh, I can calculate my net worth tomorrow” or “Ehh, I’ll set up that auto-deposit next month.”
But if you say that stuff, you’re just coming up with excuses. Take action today, and you’ll be one step closer towards financial success.