Do you want to increase your wealth? I'm sure everyone does. In today's brutal economy where it seems that wealth is going DOWN everywhere, wouldn't it be nice to learn ways to make wealth go UP again?
You're in luck. I have been helping clients build wealth for well over a decade now, and I am going to give you 6 sure fire things you can do today to increase your wealth.
But before we get started, here are two important principles of mine. First, building wealth is not something reserved for the highest echelons of society. Anyone can do it! It is important today more than ever that everyone learns how to make their money work harder them.
Second, wealth building requires work. Sorry, there are no free lunches out there. However, the good news is that a few small tweaks can be combined to create a dramatic effect. The magical math behind wealth building involves multiplication, not addition (i.e. 5 x 5, not 5+5). That means that several changes will multiply and compound into a significant increase in wealth.
Now let's get to the things you can do right now to increase your wealth.
1. Calculate Your Net Worth:
Okay, I know what many of you are probably thinking. "Did he just say calculate something? I hate math!" Relax, this math is easy. I promise.
First things first: What exactly is your net worth? Simply put, your net worth is all the stuff you own minus all the stuff you owe. Think of all your assets (bank accounts, investments, car, house etc.) as pluses, and all your debts (credit card balance, college loan, mortgage etc.) as minuses. All your assets minus all your debts is your net worth.
To calculate your net worth, take out a sheet of paper. At the top of the sheet, list all your assets. Your cash and investments should come first, followed by your fixed assets (i.e. car, furniture, house). Beside each asset, write down a reasonable dollar value. Values for cash and investments are unusually straight forward (just use your last bank statements). For fixed assets, write down a value that you can reasonably get if you sold the item (i.e. you would hate to part with your jewellery, but you could sell it for $2,000 if you absolutely had to).
So why is calculating your net worth so important? You want to increase your wealth, right? Then you need to know what your wealth is today in order to increase it over time. Your net worth is a measure of your wealth. Just like a doctor checks your blood pressure to measure your physical health, your net worth is a measure of your financial health.
You should calculate your net worth periodically, at least once a year. Comparing your net worth today to the last time you calculated it will help you see important trends and keep you on the right track.
2. Create a Plan that Will Boost Assets or Shrink Debts:
After figuring out your net worth, create a plan that focuses on assets or debt. Remember, assets are pluses and debts are negatives, so boosting an asset or shrinking a debt will both increase your wealth.
For example, say you want to reduce your credit card debt. By allocating an extra $100 a month and putting that cash on your credit card bill, you will shrink your overall debt and increase your wealth. Looking at an example on the asset side, an extra $100 a month put into a savings account will increase your overall assets and increase your wealth.
Simple plans tend to work the best (i.e. I will use half of any annual bonus as a lump sum payment on my mortgage until it is paid off). Achieving lots of little plans works, too (i.e. once my coin jar is full, I will empty it and put the money on my credit card bill.) Remember, little baby steps will compound into a big leap in wealth.
3. Always Get Paid:
Many of us have jobs that we go to each day. We expect our employers to pay us for the time we spend at work. After all, time is money, and money (as we just learned) is an asset. So using this logic, you should expect ALL your assets to pay you money.
This point may sound a little radical, but please hear me out. Here is an example. We would probably all agree that a landlord should rightfully expect rent from a tenant who lives in his apartment building (the building is an asset of the landlord). Sounds reasonable, right? So why wouldn't the landlord expect the same arrangement (i.e. the payment of rent) from ALL his assets, apartment building or not?
My point is that the best assets to increase your wealth are the ones that pay you "rent." Bank accounts pay "rent" (also known as interest). Investments pay "rent" (also known as dividends or capital gains). A family home also pays "rent" (mostly capital appreciation, although many people caught up in the real-estate bust may not agree). Things like cell phones and cars don't pay rent, and in fact go down in value over time.
4. Use Debt Wisely:
Debt is getting a very bad wrap lately. All we hear about today is people and governments and their huge amounts of debt. There is no denying that there is way too much debt in the world today, but I still believe that debt is one of the greatest inventions of all time. I'm sure cavemen thought fire was the greatest invention of all time, until it burned the cave down (wait a minute, can a cave even burn down?)
The bottom line is that, when used prudently and in proper amounts, debt can be used to acquire lots of good assets (i.e. ones that pay you rent) that will greatly increase your wealth.
5. Find Out Where Your Money Goes:
I apologize, but I'm going to use a swear word now. "Budget." There, I said it. Most people hate hearing the word "budget", so let me make this part as easy for you as possible.
Budgeting is a great way to keep track of your finances and help you increase your wealth, but let's face it: Budgeting is hard. Keeping track of your income and expenses is very tedious and time consuming. Unless you actually like adding and subtracting lots of numbers, budgeting is something most people avoid like the plague.
I have a couple of solutions for you. First, there are software programs available that can help. I personally use a program called "Quicken" (I download all my banking info and Quicken does most of the heavy lifting). Many other software solutions are also available; many banks now offer budget reports that show you where your money is going as part of their online services.
For those of you who don't like the first solution, here is the second solution, what I call the quick and dirty method of finding out where your money goes. It works like this: Take your gross salary in any calendar year, subtract the taxes you paid that year, and subtract the savings you made that year. The result is all the money you spent on all the "stuff" in your life. For example, if you made say $50,000 one year, paid $20,000 in taxes and saved zero, you spent $30,000 on the stuff in your life that year. (This approach may sound crude, but from my experience it works fairly well, especially when you do it a few times combined with calculating your net worth).
6. Start Today:
The final thing you can do right now to increase your wealth is start right now. It is easy to put things off, but the sooner you start, the easier it is to increase your wealth.
You're in luck. I have been helping clients build wealth for well over a decade now, and I am going to give you 6 sure fire things you can do today to increase your wealth.
But before we get started, here are two important principles of mine. First, building wealth is not something reserved for the highest echelons of society. Anyone can do it! It is important today more than ever that everyone learns how to make their money work harder them.
Second, wealth building requires work. Sorry, there are no free lunches out there. However, the good news is that a few small tweaks can be combined to create a dramatic effect. The magical math behind wealth building involves multiplication, not addition (i.e. 5 x 5, not 5+5). That means that several changes will multiply and compound into a significant increase in wealth.
Now let's get to the things you can do right now to increase your wealth.
1. Calculate Your Net Worth:
Okay, I know what many of you are probably thinking. "Did he just say calculate something? I hate math!" Relax, this math is easy. I promise.
First things first: What exactly is your net worth? Simply put, your net worth is all the stuff you own minus all the stuff you owe. Think of all your assets (bank accounts, investments, car, house etc.) as pluses, and all your debts (credit card balance, college loan, mortgage etc.) as minuses. All your assets minus all your debts is your net worth.
To calculate your net worth, take out a sheet of paper. At the top of the sheet, list all your assets. Your cash and investments should come first, followed by your fixed assets (i.e. car, furniture, house). Beside each asset, write down a reasonable dollar value. Values for cash and investments are unusually straight forward (just use your last bank statements). For fixed assets, write down a value that you can reasonably get if you sold the item (i.e. you would hate to part with your jewellery, but you could sell it for $2,000 if you absolutely had to).
So why is calculating your net worth so important? You want to increase your wealth, right? Then you need to know what your wealth is today in order to increase it over time. Your net worth is a measure of your wealth. Just like a doctor checks your blood pressure to measure your physical health, your net worth is a measure of your financial health.
You should calculate your net worth periodically, at least once a year. Comparing your net worth today to the last time you calculated it will help you see important trends and keep you on the right track.
2. Create a Plan that Will Boost Assets or Shrink Debts:
After figuring out your net worth, create a plan that focuses on assets or debt. Remember, assets are pluses and debts are negatives, so boosting an asset or shrinking a debt will both increase your wealth.
For example, say you want to reduce your credit card debt. By allocating an extra $100 a month and putting that cash on your credit card bill, you will shrink your overall debt and increase your wealth. Looking at an example on the asset side, an extra $100 a month put into a savings account will increase your overall assets and increase your wealth.
Simple plans tend to work the best (i.e. I will use half of any annual bonus as a lump sum payment on my mortgage until it is paid off). Achieving lots of little plans works, too (i.e. once my coin jar is full, I will empty it and put the money on my credit card bill.) Remember, little baby steps will compound into a big leap in wealth.
3. Always Get Paid:
Many of us have jobs that we go to each day. We expect our employers to pay us for the time we spend at work. After all, time is money, and money (as we just learned) is an asset. So using this logic, you should expect ALL your assets to pay you money.
This point may sound a little radical, but please hear me out. Here is an example. We would probably all agree that a landlord should rightfully expect rent from a tenant who lives in his apartment building (the building is an asset of the landlord). Sounds reasonable, right? So why wouldn't the landlord expect the same arrangement (i.e. the payment of rent) from ALL his assets, apartment building or not?
My point is that the best assets to increase your wealth are the ones that pay you "rent." Bank accounts pay "rent" (also known as interest). Investments pay "rent" (also known as dividends or capital gains). A family home also pays "rent" (mostly capital appreciation, although many people caught up in the real-estate bust may not agree). Things like cell phones and cars don't pay rent, and in fact go down in value over time.
4. Use Debt Wisely:
Debt is getting a very bad wrap lately. All we hear about today is people and governments and their huge amounts of debt. There is no denying that there is way too much debt in the world today, but I still believe that debt is one of the greatest inventions of all time. I'm sure cavemen thought fire was the greatest invention of all time, until it burned the cave down (wait a minute, can a cave even burn down?)
The bottom line is that, when used prudently and in proper amounts, debt can be used to acquire lots of good assets (i.e. ones that pay you rent) that will greatly increase your wealth.
5. Find Out Where Your Money Goes:
I apologize, but I'm going to use a swear word now. "Budget." There, I said it. Most people hate hearing the word "budget", so let me make this part as easy for you as possible.
Budgeting is a great way to keep track of your finances and help you increase your wealth, but let's face it: Budgeting is hard. Keeping track of your income and expenses is very tedious and time consuming. Unless you actually like adding and subtracting lots of numbers, budgeting is something most people avoid like the plague.
I have a couple of solutions for you. First, there are software programs available that can help. I personally use a program called "Quicken" (I download all my banking info and Quicken does most of the heavy lifting). Many other software solutions are also available; many banks now offer budget reports that show you where your money is going as part of their online services.
For those of you who don't like the first solution, here is the second solution, what I call the quick and dirty method of finding out where your money goes. It works like this: Take your gross salary in any calendar year, subtract the taxes you paid that year, and subtract the savings you made that year. The result is all the money you spent on all the "stuff" in your life. For example, if you made say $50,000 one year, paid $20,000 in taxes and saved zero, you spent $30,000 on the stuff in your life that year. (This approach may sound crude, but from my experience it works fairly well, especially when you do it a few times combined with calculating your net worth).
6. Start Today:
The final thing you can do right now to increase your wealth is start right now. It is easy to put things off, but the sooner you start, the easier it is to increase your wealth.
