Do you hope you to achieve financial freedom sometime in the future? Well if your answer is yes then the first thing to do is to look for ways through which you can increase your net worth
Your net worth is just the total of all your assets; cash, house, investment minus all your liabilities like student loans, mortgages, car loans etc.
The first step to financial freedom is increasing your net worth. So how do we do this?
1. Get out of debt
Debt is a liability and unless you eliminate it you will not realise an increase in your net worth. You should first look to get rid of debts with high interest rates as they will take a huge chunk off your net worth then look to eliminate the ones with slower rates. Remember increasing your net worth is not always about increasing your income it is also about reducing liabilities. Reduced liabilities is increased net worth.
2. Look for ways to increase your income
While you reduce your liabilities you also need to increase your assets. You should hence look for ways to increase your income whether it is through seeking for a pay rise or even starting other alternative business that will see you get more money than you are already getting.
3. Buy a house
People spend a huge percent of their pay checks on rents. Do your math and you will find you spend about 40% of your budget on rents. So you will agree with me when I say rents do not help your net worth in any way. It is just another liability. So you should look for ways to cease paying rent; buy a house. It is not something that you will do overnight but once you are done you will see its fruits.
4. Make sure you have enough money on your emergency fund
Emergencies can sometimes hurt our net worth because it is something we did not plan for. So you need to prepare for the worst and set aside an emergency fund if you have none and if you already have you may at least consider increasing it so will be able to tackle anything that comes your way.
5. Spend less
You also need to look for ways in which you can spend less than you are already spending. Whether it is through cutting costs or even foregoing other things that are not that necessary. Spend less, save more and increase your net worth.
6. Buy insurance
You need protection. Buying insurance even though it may cost you today it will save you tomorrow. Emergencies will cost you in case they happen so you need to protect your assets from the emergencies by buying insurance. Ask yourself now whether your car, house and other property you see valuable are secure. If not swing into action and insure them.
7. Have assets that increase your wealth
Do the assets you have bring in more money? To realise an increased net worth they need to bring you more money. If for example you have houses you need to make them rental.