What would you do if you could magically increase your net worth by $1,000 tomorrow? Would you spend it on yourself, or save it for a rainy day? In reality, increasing your net worth is not quite as simple as that, but there are definitely ways to do it without depriving yourself. Here are some things that will help you make the most of your money while still enjoying life!
First, calculate what your net worth is.
Net worth is simply the difference between your assets and liabilities. Your assets are everything you own and can use to pay your debts, while your liabilities are all of the money you owe. It is very helpful to have this all written down whether it be in a notebook you keep or in a tool like Finotion so you can refer back to one place and easily view changes. To calculate your net worth, simply subtract your total liabilities from your total assets.
One of the most important things to understand about money is compound interest. When we place our money in places where we can consider compound interest our money is working for us as we let it sit. This means that, over time, the amount of money you have saved will grow exponentially. That’s because with compound interest, not only do you earn interest on your original investment, but you also earn interest on the accumulated interest from prior periods!
To illustrate how this works, let’s imagine you put $100 into a savings account that pays five percent annual compound interest. In the first year, you would earn five in interest on your initial deposit, for a total balance of $105.
In another example, let's look at money invested in the stock market via retirement or brokerage accounts where the average interest that accumulates when you invest is about seven percent. This means that if your net worth is $50,000, it will grow to $54,000 in a year. While this growth is not astronomical, it can still help you reach your financial goals over time. Additionally, investing in stocks allows you to make money while also enjoying some of the benefits of owning assets such as property or businesses. A great way to increase your net worth is by taking advantage of this - make a plan to contribute to such accounts whether it is $5 a month or $500 it will still grow more there than just sitting in a traditional bank account. ***
High-Yield Savings Account
What's another way to increase your net worth without giving up all the fun, you ask? A high-yield savings account! These accounts offer interest rates that are significantly higher than traditional savings accounts. This means you can grow your money without having to sacrifice your lifestyle.
Rates on high yield savings accounts vary, but you can typically expect to earn around 0.50% - 0.75% interest on your deposited funds. However, some banks offer rates as high as two or three percent! If you know you'll need access to your money within the next five years, a high-yield savings account is a smart place to park it. ***
When it comes to growing your net worth, tracking your finances is essential. By knowing where every dollar goes, you can start to place your money in better places that will help it grow. This means budgeting and being mindful of each and every expense.
It may be difficult at first, but over time it becomes easier, especially if you have your financial information in one place. And the benefits are definitely worth it – a higher net worth means more financial stability and freedom down the road. Plus, you get to enjoy occasional treats without breaking the bank!
So track those finances diligently, stay focused on your goals, and reap the rewards of a bigger net worth. You’ll be glad you did!