Your net worth is more than just your bank account balance. It’s a metric for your financial well-being.
To find out the answer to the question, “What is my net worth?” Subtract your overall obligations from your total assets to arrive at your net worth.
Here’s a list of 15 key assets to consider if you’re seeking to figure out which ones are the most valuable or will otherwise increase your net worth.
1. Possessing a Primary Residence
Homeownership is one of the most prevalent ways for people to significantly enhance their net worth. Instead of a standard 30-year mortgage, choose a 15- or 20-year term to pay it off faster and accumulate a considerable asset while saving money on interest.
If you decide to sell your property after paying it off, capital gains are tax-free up to $500,000 if you are married filing jointly.
In some high-priced urban regions, renting may make more financial sense than buying, depending on whether the cost of ownership is affordable in relation to total living expenses.
2. Second Residence
Short-term rental sites such as HomeAway, VRBO, and Airbnb make second homes a smart way to earn passive income. You can utilise the extra money to help pay off your mortgage faster at first.
Then, once you’ve paid off the mortgage, you’ll possess a valuable asset while also earning passive income if you choose to rent it out — both of which can result in a considerable increase in your net worth.
3. Investing for Retirement
Although retirement may be decades away, saving now might help you increase your net worth.
You can start saving for retirement right now, and tax-deferred vehicles like a 401(k) or a classic IRA can help your savings balance grow faster.
Make it a point to contribute a specified amount each paycheck to your retirement account, especially if your employer matches your contributions. You’ll consistently put money aside if you regard your savings contributions as a budget item, which will allow it to grow and boost your net worth.
You may not realise it, but your educational credentials are one of your most valuable assets. Choosing to invest in your own education in order to qualify for a better job or a promotion can pay off handsomely in the long run.
Your education doesn’t have to finish when you graduate with a bachelor’s degree. You could take up a student loan from a credit union if it offers in-school student loan alternatives and parent loan options through Sallie Mae Bank or a lending partner to help pay for the cost of continuing education classes or certifications.
Consider this if you’re still not convinced: With a 2% interest savings account, you’d have to invest $300,000 before seeing $6,000 in extra income — an amount that can come much more rapidly from a promotion or annual increase earned as a result of additional education.
5. Rental Property
When you borrow money from the bank to buy rental properties, you’re effectively increasing your net worth. Instead of going into your bank account after you start renting out the houses, utilise the income to pay off the mortgages.
Your properties will gain equity, and the market worth of your properties should rise over time.
If you’re not ready to buy homes on your own but have real estate experience, you can enlist the help of a group of investors to fund the down payment with the understanding that you’ll own a part of the property.
After you’ve successfully financed the rental property, you can negotiate a management fee with the investors.
Having good health is a valuable asset when it comes to increasing your net worth. It enables you to work longer hours and be more productive without having to spend a fortune on medical appointments, treatments, or procedures. Eat well, exercise regularly, and see your doctor for regular exams to invest in your health.
7. Savings for College
Many parents enrol their children in a 529 college savings plan, which raises their net worth until it’s time to use the funds for school. As long as the funds are spent for qualifying school expenses, 529 plans grow tax-free and distributions are tax-free.
It is also possible to transfer funds between beneficiaries without incurring any fines or taxes. For instance, cash could be split among several siblings.
8. Keep Your House in Good Repair
It makes sense to invest in the upkeep of your home, as it is likely one of your most valuable possessions. When it comes time to sell, things like repairing your roof, cleaning your gutters, and regularly servicing your HVAC system can help you earn a greater return.
Neglecting your house, on the other hand, may allow potential purchasers to exploit the lack of maintenance as a bargaining chip, leaving you with less money in the end.
Investing can be a fantastic way to make money, but it’s not guaranteed. Before you make an investment, do some homework. You’ll also need a firm grasp of when to buy and sell stocks.
You don’t have to do it alone if you’re new to the stock market. Seek guidance from an investment advisor who can assist you in selecting the finest stocks for your portfolio based on the level of risk you’re willing to take and the return you want to achieve.
10. Commonplace Objects
You might not think that buying a new refrigerator or laptop will increase your net worth, but think about the overall picture.
It pays to acquire the greatest quality, longest-lasting products you can afford, while simultaneously considering the pace at which these items depreciate, just as it does when buying a car.
Paying repair fees and replacing appliances on a regular basis might be pricey, but investing in high-quality things increases your net worth by allowing you to save more money.
Read reviews, compare goods, and uncover the best bargains to determine which brands and models are the best investments.
11. Private Lending
Being someone else’s bank gives you the opportunity to earn passive income and increase your net worth. Private loans, notes, and trust deeds are investments in which you lend money to private individuals or businesses in exchange for a return on your investment.
Regardless of whether the value of the underlying asset rises or falls, you’ll still earn a steady rate of return on these investments, which translates into funds you may choose to reinvest and grow your wealth.
To protect your interests, make sure you understand the ins and outs of a potential investment by seeking guidance from a seasoned professional, such as a broker, company, or appropriately qualified and regulated partner.
12. Antiques and collectibles
Collectibles may be much more than a pastime. They can help you increase your net worth, particularly if you become a specialist in a certain field.
Fine art, antiques, and rare wine are all worthwhile investments. However, just because a collector item was profitable in the past, such as Elvis memorabilia or general World War II goods, doesn’t imply it’s now a solid investment.
That is why it is critical that you educate yourself. Consult with renowned pawn shop and gallery owners, as well as other industry professionals, to get the knowledge you need to buy in collectibles that will increase your profits.
13. Permanent Life Insurance
Most people believe they can’t use their life insurance unless they die, but this isn’t always the case.
The premiums you pay on a permanent life insurance policy, such as a whole life, universal life, or variable life policy, increase tax-deferred.
You can access the funds tax-free after the policy has reached a certain cash value. The money you’ve saved, less any fees, qualifies as an asset that can help you build your net worth.
Consider working with an independent life insurance broker if you’re looking for permanent life insurance.
Your residual income might be severely impacted by the vehicle you drive. According to Insure.com, flashy sports cars and luxury automobiles are lovely, but they’re also the most expensive to insure, coupled with high monthly payments.
Before purchasing an automobile, investigate variables such as reliability, safety features, long-term maintenance costs, and insurance costs. If you’re not sure where to begin, a car-buying service can help you get started.
Investing in a trustworthy vehicle that will preserve its value for years after you pay it off can save you money on having to buy a new vehicle every few years, which will reduce your net worth.
15. Earnings from a Second Job
Choosing to engage in a side hustle can help you supplement your income. And as long as you save or invest the money, your net worth will rise.
Consider professions that pay well enough to be worthwhile, such as locating and reselling stuff for a profit, house sitting, Uber or Lyft driving, becoming a virtual assistant, or writing resumes.