A net worth is everything you own minus everything you owe, in other words, assets minus liabilities.
More often than not, people owe more than they own, meaning they do not have any net worth.
In order to build your net worth, you need to focus on 4 elements: “income-ing”, saving, investing and simplifying your life.
Income-ing: yes, it is a word I have just created. Making money is the basis of building net worth. There are many ways of making money: through a job or a business, but also from investing or earning royalties. The list is pretty much infinite!
Saving: next, you need to save some of your income. You can make a whack load of $, but if you don’t stash some away, you will never build any net worth.
Investing: once you have some cash, put it to work for you. Educate yourself about the various investments out there. It really isn’t rocket science! Make sure your investments are in line with your risk tolerance and the stage you are at in your life, as well as your goals.
Simplifying your life, a.k.a. spending less: This one is the toughest for most people, including myself. Our brains are wired to spend and seek instant gratification. It is about balancing immediate pleasure with long-term goals. It is about consciously creating a lifestyle in which you need less money to live on. The money freed can be used for saving and investing, thus building net worth.
The best way to see and commit to your net worth is to regularly track and review it.