Assets to Grow Your Net Worth
You net worth is more than just a number in your bank account. It is a financial report card that will measure your financial health. Knowing your net worth is very important since it will help you identify certain areas where you spend too much money. Well, how do you calculate your net worth? You simply subtract your total liabilities from your total assets, which will give you your net worth! Simple, right?
If your total net worth is a negative number, that means you owe more than you own. If the number is positive, that means you own more than you owe. There are many ways that you can grow your net worth, so figure out which ones fit into your lifestyle and make some profitable investments towards your future.
1. Owning your primary residence
Owning your home is one of the most common ways to grow your net worth. The more equity you have in your home, the more it will boost your net worth. Owning your home can be one of the largest gains in your net worth, especially if you choose a 15- or 20- year mortgage and it is paid off in a reasonable time. When including your home your calculations for your net worth, you must keep in mind that you are subtracting your liabilities- including your mortgage. This means that if you have a home valued at $500,000 and you owe $300,000 on your mortgage, you are essentially adding $200,000 to your net worth. As you continue to make payments on your mortgage, your net worth will increase.
2. Vacation Homes and Rental Properties
Vacation homes and Rental properties are both great ways to help boost your net worth. Rental properties and vacation homes build your net worth because they allow you to use the bank’s money to acquire the property. Tenants will pay the mortgage, which enhances your equity on the property, all while the market value of the property continues to increase. Vacation homes are another great way to earn a passive income since you can use rental platforms like Airbnb to manage your short-term rentals. This offers a great little side hustle to help you quickly grow your net worth.
3. Retirement Savings
You may not want to think about retirement, but by saving now you can increase your net worth for retirement. Many private employers offer retirement plans that have desirable tax characteristics. Often, employers will have matching programs, which allow you to max out your retirement contributions and your employer will match it. This will help your contribution grow faster and defers your taxable income to your lowest earning years. By taking action now for your retirement, you will slow one of the biggest impediments to growing your net worth – taxes.
Investments are another fantastic way to build a passive income, which helps increase your net worth. There are several different types of investments like stocks, bonds, and mutual funds, but it should be noted that most of these investments will fluctuate over time. So, when you are thinking about making an investment, do a little research. To help you improve your chances of making a sound investment, you can talk to a professional. They will help you choose the best stocks and other investments for your portfolio based off how comfortable you are the kind of return you are expecting. Most investments will fluctuate over time, so you should note these changes whenever you calculate your net worth.
Collectibles can be more than just a hobby since they can also help you increase your net worth. The value of these assets depends on current trends and the demand for those items – art pieces, rare wines, and vintage cars can increase your net worth substantially! People can strike it rich by finding old pieces of artwork or other memorabilia that are worth thousands of dollars. Ever watch “Storage Wars” and see all the cool things they dig up from old storage units? Educate yourself on the market and seek out a professional appraisal if you think something could be worth a significant amount of money.
Specific assets like homes, collectibles, and other investments can have a significant impact on your net worth. Whether you have been investing for years or you are just starting out, seek out a professional to help support you in making knowledgeable decisions in your investments. If you have more questions around your financial situation, get in touch with us here and let’s discuss your future!