Many people are interested in net worth. In fact, some people are even googling what my net worth is!
So what are the keys to increasing your net worth?
1. Live below your means
Net worth isn’t the same as having a big salary. As per Dr Thomas Stanley’s fantastic research, most wealthy people don’t overspend.
If you want to lose weight, it is 70% or 80% dependent on diet, and only about 20% exercise. Likewise, if you want to get wealthy, it is 80% your spending habits that count, and 20% dependent on your income.
2. Avoid Parkinson’s law.
What is Parkinson’s Law? It is the saying that “work expands so as to fill the time available for its completion”.
We all knew the person at university who could complete a great essay, with the help of coffee no doubt, just a few hours before the deadline.
In money, Parkinson’s law states that the more money you earn = the more you will spend. So “expenditure will expand to meet income”.
That is one reason why many people fail to invest in their 30s, despite (usually) having much higher incomes than when they graduated.
One of the ways to avoid this is by investing into your brokerage account one day after you are paid. Studies have shown this can increase investment results by as much as 200%-300%.
It is something Buffett also recommends when he remarked that “don’t save what is left after spending, but spend what is left after saving”.
3. Review everything
Net worth is just your assets – your liabilities. Ask an impartial third party to review all your assets and liabilities. There will surely be ways to optimize.
4. Read, implement and ask a lot
Two of the easiest ways to improve your income is by reading a lot, and simply asking for a pay rise, or being more direct in business.
It is amazing how many people don’t get what they could be, simply due to being too shy to ask.
Likewise, it is also amazing how many people read great books…..and then fail to implement what they have learned.
Gary Vaynerchuk starts many talks by telling his audience that he knows that “only 1% of you will take any action”. It isn’t secrets or ideas we need. Execution is key. Taking action now is a must.
5. Spend time with better people and get rid of toxic ones
If you want to get fit, lose weight and reduce drinking, it probably isn’t a good idea to keep going out with some fat alcoholics!
Likewise, if you want to get wealthy, spend more time with those that you consider to be good with money, and less time with those that encourage you to do things you know are harmful.