What is your net worth? In the simplest terms, your net worth is the economic value of what your assets or what you actually own, less the economic value of all your liabilities or debts that you have. So in terms of personal wealth, even you have houses and automobiles, if they are all acquired on outstanding loans, the only actual portion of your net worth is your equity or the portion that you did not borrow. That is your personal wealth.
So how does one go about creating wealth for one self? There are several ways, but all of those ways require discipline and political will. They are actually pretty basic, but they are all much easier said than done.
Here are the basic principles:
1. Live within your means.
a. Know what you can and cannot afford and establish them as fact.
b. Prepare a written budget so you can see where funds are flowing in and out.
c. Avoid going into and accumulating debts.
d. If you already are into debt, create a payment plan to eliminate the outstanding balance as soon as possible.
2. Save and conserve your resources
a. If you can manage, spend less than what you make.
b. Choose to use more economical alternatives or reuse things if possible.
3. Plan on multiplying your savings and resources.
a. Employ savings and investment alternatives according to your risk appetite.
b. Put your money into assets that generate income instead of those that require periodic expenditures to keep it.
4. Go into additional income generating activities.
a. If possible, aim to have a way to augment your current income
b. Evaluate whether it is feasible for you to have multiple income streams.
c. If it is both possible and feasible, then go about it with an open mind.
d. Prepare to work at it like a business, not as a hobby, because that is what it actually is.
To decide and actually live within your means require a strong resolve, a political will to not overspend. And how do you know when you are actually not overspending? You need to discipline yourself to exert time and effort to write things down and keep track. When you have achieved that, you can now move on to looking at how you can best mobilize the savings you have generated.
To go about generating additional income would also require a great deal of discipline and sacrifice on your part. It is an investment. It takes hard work, resolve, motivation and consistency. It is not a walk in the park. You can look at online alternatives, but be prepared to do some legwork. I assure you, it will yield its returns in due time.
