If you want to be super rich, you need to be focused on growing your personal net worth. Take note that this is not just about the amount of cash that you have. It involves your overall value. When computing your net worth, you need to consider your cash, investments, assets and other factors in your life that add to your value.
Some Americans think that their lives never really improved after the Great Recession happened. But if you look at the statistics, you will realize that there is a rise in the number of millionaires all over the world. According to the website WorldWealthReport.com, there are 14.6 million millionaires around the world as of 2014. In North America, there are 4.68 million millionaires – up by 8.3% from 2013. The most number of millionaires can be found in the Asia-Pacific region with 4.69 million of them. The number of millionaires in this regions increased by 8.5% compared to 2013. The region that comes in third when it comes to millionaires is Europe with 3.99 million millionaires, up by 4%. Even Middle East (0.61 million) and Africa (0.15 million) have more millionaires now with a growth of 7.7% and 5.2% respectively. Only Latin America have less millionaires now at 0.53 million – a 2.1% decrease.
You see, regardless of the economic conditions, some people just know how to manage their resources so it will grow and make them millionaires.
3 steps to grow your net worth
You will find a lot of tips and steps and techniques all over the Internet that will teach you how to become a millionaire. The truth is, there is no one-formula to getting rich. People like Warren Buffet, Donald Trump, Robert Kiyosaki and all the other successful individuals out there have different get-rich methods. What works for one may not necessarily work for you. This is why you need to be careful when you are looking for tips to improve your financial situation.
If you think about it, becoming rich begins and ends with financial management. You will never be a millionaire unless you know how to manage your money well. Not only that, you cannot stay a millionaire if you fail in money management as well. But apart from financial management, there are three steps that will help you grow your personal net worth.
Step 1: Get rid of too much debt.
The first step is to lower your liabilities. When it comes to financial liabilities, the first thing that comes into mind is credit. The truth is, debt is not all bad. Millionaires believe that there is such a thing as a good debt and they know how to use it to their advantage. But you need to know which debt is sucking the life out of your finances. You need to find them and end their association with your money. They will only bring your personal net worth down. High-interest credit card debts are on top of the list. You can continue to use credit cards for a more convenient shopping experience but make sure that you can afford to pay it in full when the bill comes. The idea is to keep the high interest rate from touching your balance. That is how you are wasting money when you let credit card debt get out of hand.
If you lower your debt balance, you will also raise your credit score. This will open up a lot of financial opportunities for you – like a low interest rate on a loan that will help you finance investments.
Step 2: Secure your future.
There is a simple way that you can secure your future and that is to save. You need to save up for your emergency fund. You need to start contributing towards your retirement fund. You also have to think about the college fund of your kids so you can help them stay out of student loans. The last fund can also be for your own education so you can qualify for a higher compensation at work. All of these funds should be considered if you want to grow your personal net worth. Those who start contributing to their retirement fund while in their 20s will most likely be a millionaire by the time they retire. That is the beauty of compound interest.
When it comes to your emergency fund, this will secure your future – especially against debt. If you borrow money because of an unexpected event, that cannot be considered a good debt. In most cases, debts borne out of emergencies are done out of desperation and that usually means you are on the losing end. Good debts are those that are well planned. To make sure that you will never go into any unplanned debt, just build up your emergency fund.
Step3: Invest your money.
The most proactive way to grow your personal net worth is by investing your money. Putting your money in a savings account is not really considered an investment because of its pitiful interest rate. You need to literally invest your money in stocks, bond and mutual funds to help make it grow as the economy of the country continues to recover. According to an article published on CapGemini.com, High Net Worth Individuals invest their money in different ways. The survey known as Global High Net Worth Survey , revealed that the net worth of HNW individuals are divided into 5 categories: Equity (27%), Cash (26%), Real Estate (20%), Fixed Income (16%) and Alternative Investments (10%). As you can see, most of their wealth is kept in equities. This is because it has the best chance of growing there.
Learn about investing because this is a great way for you to increase your personal net worth. There are both low-risk and high-risk investments that you can dabble in. The rule is, the higher the risk, the higher the potential for growth is.
The millionaire mindset will help improve your wealth
Take note that completing the three steps discussed above does not guarantee that you will become a millionaire. It will help improve your personal net worth but whether or not it will make you a millionaire is still uncertain. That will depend on how you will manage your money after you have invested it. You still need to practice the right financial management skills and at the same time, apply the millionaire mindset.
In the website RichHabits.net, Thomas C. Corley revealed the 5 habits that help make people rich. The author spent 5 years studying 233 millionaires to determine the reasons why they are currently successful. Mind you, these are not millionaires who were born rich. These are self-made millionaires. They worked hard to be where they are and if you want to be like them, you need to implement the following habits.
- Create multiple sources of income. The first habit is to diversify your streams of income. Do not depend on just one because if something happens to that source, you will be left with nothing. According to the studies done by Mr. Corley, 65% of these self-made millionaires have three or more sources of income. These include rental incomes, stock market investments, side businesses, royalties, etc.
- Dream before you set a goal. Before you define your goals, make sure you identify your dream first. Your dream will point you to the general direction that you want your life to take. Once you know where you want to go, you can set the smaller goals that will take you there. You can begin by writing down where you want to be in 5, 10, 15 and 20 years time. Be specific about the details like where you want to live, how much your personal net worth should be, etc. When you have these written down, it should be easier to identify what you need to do in order to reach them. Setting your goals around these dreams will make it easier to take action because you have your motivation through your dream.
- Avoid wasting your time. The article also revealed that millionaires try not to waste their time. There is great value in time and once you waste it, you cannot bring it back. So make sure that every moment spent in your life will count.
- Find a mentor. Go and find someone that you want to emulate and learn from them. Most of the millionaires in the world attributed their improved personal net worth to their mentors. It could be your parents, a friend, a boss, or a teacher. Find someone that you respect and you know will have a positive influence in your life.
- Do not quit on a dream. The last habit pointed out by Mr. Corley is to never quit on a dream. An admirable trait of self made millionaires is they are very persistent. When you find an obstacle blocking your way, you either go through it or you go around it. You never stop just because things get a bit too hard. If you fall, you stand up to try again. That persistence will help you grow your personal net worth until you become a self-made millionaire yourself.
Here is a video with 17 tips that will help you get a millionaire mindset. These were created by T. Harv Eker.