Before we go into details, it is very important to understand the difference between income and net-worth. There are people in society who are highly paid professionals like doctors, lawyers, CEOs, C level executives. All of them earn high six or seven figures but not all of them have high net-worth. Some are broke or just 6 months away from being broke. Have you ever wondered why some highly paid professional athletes or highly paid entertainers or entrepreneurs file for bankruptcy? It is because their income has nothing to do with their net-worth. Most of them who have not built their net-worth are living with you only live once mentality. They spend more than they earn to please people who don’t even care. Living the life of wandering generality with a paycheck to paycheck mentality and hence they are broke. Someone who is Broke does not mean they are poor. Broke means X amount of money is coming in and X+1 is going out. Someone making million $ per year can be broke while someone making 75000$ per year might have a built a large net-worth. Net-worth means how much is left in your savings after you have deducted all your expenses. Your net-worth is your real asset.

You can calculate your net-worth but adding up all your Net income or take-home pay from all the sources and then subtract your expenses. Whatever is left is your savings /net worth. Also if you own a house, the current value of your house minus the amount you owe to the bank as mortgage is your net worth. I personally don’t like to calculate the cost of the car in my net worth because the value of cars depreciates every year. Value of your savings in 401k, stocks or bonds or CDs, Life insurance policies, the value of the jewelry ( Gold or Diamonds or precious stones) is also added to your total net worth.

Here are a few tips on how to increase your net worth:-

1) Reduce your expenses and increase your savings.

2) Pay yourself first. A minimum of 20% should go directly into savings before even you see it in your account.

3) Open a savings account with a bank that does not have easy access to ATM machines. This will restrict you to pull out the money just because you have an emotional urge to spend. Make sure that 20% of your salary is directly transferred to this account. If you cannot put 20%, start at 10% and then slowly increase.

4) Maximize your 401k. Sit with a CPA and figure out if investing in the IRA account makes sense for you. If yes, open an IRA account and start saving in that.

5) Pay off your credit cards. Start paying your high-interest card first. Once the card is paid off, do plastic surgery of the cards. Cut them down.

6) For impulse buyers, when you go out do not take your credit cards with you. Form the habit of taking cash with you and pay with cash. When you visually see the money leaving your hands, you will automatically think twice before splurging it on unnecessary things just to please yourself and impress people.

7) Start cooking at home. This has multiple benefits. You will save money, eat healthily and will spend some great quality time with family when you cook together. You will also teach your kids to eat healthily and save money.

8) Before making any major purchase, ask yourself if you really need it. Wait for a week and after a week if you still need it and if you can pay cash for it without entering into major debt, go for it. I am not talking about cars here because you do need a car to commute to work if you are living in an area where there is no public transport.

9) When you are buying a car, buy the one which is good quality, will last for at least 150000 miles and gives good mileage. Shop around and go with the one which has the lowest interest. Don’t buy a car which you cannot afford just to compete with your friends or neighbor. Your self-esteem should come from who you are as a person and the values you have. It should not come from your material possessions.

10) Add an additional source of income or two. Instead of wasting your evening and weekends on social media or partying or Netflix, supplement your income.

11) Some people have habit of going to the bar every evening. Once they are drunk, they don’t realize how much they have spent. Some go to Casinos every weekend. That kind of recreation is very expensive BOTH on the wallet and on health. STOP chasing happiness outside. Spend time in personal growth. Your personal growth will grow your income.

12) Find someone who has a high net worth. Seek out their help and see if they are willing to mentor you. If they agree, be in their back pocket. Follow their guidance.

Self-discipline is highly required to achieve success in anything. In the beginning, forming new habits might be hard but it is not impossible. Keep in mind, with your habits you are not only impacting your life but also the lives of your future generation. You are teaching your children and the next generation with your example. You are impacting the next generation either positively or negatively so make wise choices and impact your kids and grandkids positively. Leave behind a legacy that your future generations will be proud of.