BY: FAZAAD BACCHUS
Last issue we discussed how to understand your financial net worth. Today we will talk about how to create your financial net worth.
As we begin to earn money we start allocating that money towards expenses and lifestyle desires. In today’s consumerist world, it’s easy to buy things, easy payment plan, easy logistics and all too attractive propositions for consuming. You may have noticed last week in the news that the richest man in the world is no longer Bill Gates but the founder of Amazon. That may give you an idea of the number of people who are buying things from Amazon, with the click of a button, your product is at your doorstep for your use. Very easy logistics and I must admit, quite a pleasurable buying experience.
However, your wealth and your estate are not created by spending everything you have. While I agree that one should spend in order to have a better lifestyle, it must always be asked at what cost am I doing this. Here are a few tips that will help you to create a better estate or improve your financial net worth.
Educate yourself: The more educated you are the better your chances of landing a better job or doing better at your current job. The more skilled you are the better chances of moving up the ladder. Canada appreciates those who are educated and who are willing to work hard.
Work: As long as you have life in your body and the strength to work, you must work. Work creates a balance in life and a sense of purpose, a sense of accomplishment. The more you work the more hours you accumulate and the better you become at your job. Thereafter you are more likely to be promoted and thus resulting in a higher paying job. More money from your employer ultimately means the possibility of more money in your pocket.
Spend less than you earn: I know this is a difficult one to achieve. However, this action requires sacrifice on the part of most people. If the outflow is more than the inflow, the river will eventually run dry. You cannot increase your wealth if you spend more than you earn, therefore plan your expenses and make sure you have a budget.
Save and invest: Money which is invested grows, and thus increases your financial net worth. What can you invest in, that is the tough question. You can invest in real estate or in financial instruments eg: mutual funds, both can provide a decent return, however, they each have their drawbacks. Do not invest in assets which depreciate as this does not increase net worth.
Buy life insurance with cash value: There is a double benefit here; one is that by buying life insurance you have created an immediate estate. Should you pass away suddenly or prematurely, your family will receive the death benefit which is an instant estate created. If you were to live on the other hand to a ripe old age, the policy would have amassed cash values that you can use for whatever you need, especially funding your retirement.
If you need help to manage your finances, find a financial advisor who can help you with putting a plan in place.