When you hear the word wealth, what is the first thing that comes to mind? Mansions? Designer clothing? Luxury cars? Dining out at exclusive restaurants? Growing up, I probably would have had the same answers. After all, I grew up in a house that cost just $8,000. Yes. An eight followed by three zeroes. Also, my parents filed for bankruptcy twice.
However, throughout my financial career, my definition of wealth isn’t about material items. It’s all about net wealth. Why? Because looks can be deceiving.
Here’s an example from a couple who were potential clients of mine.
What is Net Worth and Why is It Important
“When you start thinking about the net worth, you might envision some internet billionaire or media tycoon—a bigwig with big bucks,” writes Megan DeMatto for CNBC. “But anyone can calculate their net worth, and it’s a good number for everyone to know.”In other words, net worth is an indicator of wealth. To figure out your assets, live savings, investments, and property, you add them all up. Then you would deduct your liabilities, such as credit card debt and mortgages.
“Net worth is different than income since we don’t necessarily keep every dollar we make,” explains DeMatto. “Instead, we buy, borrow and make investments with money, and the total value of our properties and cash goes up and down with time.”
The calculation of your net worth, then, provides an overall measure of your financial health. “Think of it like a snapshot that shows you where you are on your financial journey,” she adds.
“Keeping track of your net worth over time is a good indicator of your financial status,” asserts DeMatto. “People work hard to bring home their salaries, but what happens after your paycheck hits your bank account is not always predictable.”
Taking a look at your net worth, you can see where your money has been spent in the past versus what you hope to do with it. And, net worth can be used to see your progress when making decisions such as buying a home or a car, taking out a loan for school, or setting up a savings goal.
Ways to 10x Your Net Worth
Instead of wasting your money on items that give the impression that you have wealth, you should actually go out and build your net worth. Yes. It’s even possible if you’re starting from scratch. And, here’s how I was able to 10 times my net worth from $0 to $100,000.Surrender Your Broken Mindset
The first thing that I had to do what surrender my broken mindset. And, in my opinion, this is something that we’re born with. But, if you really want to learn more about this, I suggest you check out the book “Mindset” by Carol Dweck.According to psychologist Carol Dweck, when it comes to success, it’s not about intelligence, talent, or education. An individual with a fixed mindset believes that their intelligence, skills, and abilities can’t be changed. So, if you have a broke mindset, you are convinced that things will never change.
Like, you could come from a family where everyone is in debt and no one is considered a millionaire. So, you have this internal monologue convincing you that you can’t escape the same fate.
How can you break out of this vicious cycle? By developing a growth mindset. In regards to money, this basically means understanding that you need to learn more about money. For me, that meant exposing myself to books like “Rich Dad, Poor Dad” by Robert Kiyosaki—which I loved since it struck so close to home.
In addition to that, you also need to spend more time with more people who have a growth mindset. And, consequently, spending less time with “anti-wealth” hackers, which I call “Buttpews.”
- They are broken because they have a broken mentality, that’s why they wait for things to happen, instead of being proactive.
- These people drag their feet on every decision.
- These people are time-suckers, looking for a free lunch.
- In their eyes, the glass is always half empty.
- It is not acceptable for them to take responsibility for their actions. In other words, they constantly make excuses.
- They complain and whine about everything.
Stop Buying Liabilities
Want to know why that couple with the luxury cars, boats, and jet skis weren’t wealthy? Because these were liabilities and not assets. And, here’s a secret I want to share with you all. You can increase your net worth, without depleting your bank account, when you stop buying liabilities and purchase assets instead.But, what is the difference between buying assets and liabilities?
First, let me begin with an explanation of assets, which appreciate in value over time. In addition to real estate, companies and stocks are income-producing assets. On the other hand, liabilities drain your savings.
So, if you want to increase your wealth, you should identify and stop buying liabilities, like those fresh pair of Yeezy’s you just saw on social media. You also need to set clear of luxury brands, overpriced items like expensive haircuts and sports cars, or overpriced McMansions (large, often opulent or ostentatious, mass-produced houses). And, I would strongly suggest that when you can, always buy instead of renting.
As for assets, these would be things like real estate, insurance policies, passive businesses, and stocks and bonds.
Invest Over 20
Speaking of investing, this is the perfect segue into number three. And that’s not just investing. But investing over 20.But, let me backtrack here. There’s nothing wrong with going the traditional route when it comes to investing. Like if you have a 401(k), then awesome. It’s one of the easiest ways to save since the money is going directly out of your paycheck. It’s even sweeter if you have an employer who matches these contributions.
But, you need to take it to the next level if you can to grow your net worth. For example, you could do what I did and start investing in a Roth IRA. Was that easy? Nope. I made a lot of sacrifices at the time, like continuing to rent instead of buying a home.
However, that allowed me to invest more than 20 percent of my income. And, what’s wild, is that I was still new to the investing game and learning the ropes. But, I did my research and continued to learn so that I start trading stocks or investing in mutual funds or ETFs.
When you take that risk, you’ll learn more about different mutual funds and various investment strategies. Personally, that’s how I built my wealth. Even when I experienced failures, this helped me better understand what is within my expertise and what I’m comfortable with investing at least 20 percent.
Reframe the Meaning of Investing
To be honest, this took me some time—even though I was in the financial industry. Maybe it was because I drank the Kool-Aid when it came to making money. You know, like investing in mutual funds and the stock market.I get that none of us want to fail. But, it’s one of the best ways to learn and grow. And, that lead me to develop new sources of income like books, podcasts, coaching programs, mastermind groups, online courses, and mentorship. Or, even in investing in people, who I call income accelerators. For example, hiring people to redesign my website or diagnosis the site’s SEO.
Also, if you have the money, outsource the things that you don’t like. Tim Ferris talked about this in the “4-Hour Workweek.” But, here’s an example from back in the day. I used to spend hours searching for the best images for my blog posts. Eventually, I hired someone else to do this for me. That freed me up to find other ways to grow my wealth through this investment.
The Epoch Times Copyright © 2022 The views and opinions expressed are only those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
