Mastering personal finance is key to increasing your net worth. There are those who are born with silver spoons in their mouths, and there are those who work hard to purchase those silver spoons. But no matter where you start, the bottom line is the same: it takes work to maintain your wealth and grow it. Here’s how to go about this.
1. Anticipate market needs
Study the market and make projections. This is one of the key things that made Nigerian Aliko Dangote the richest man in Africa. His company, which mostly deals in oil and cement, is positioned to benefit from a projected growth in demand for cement over the next several years. If, say, you had a truck business, you could make a killing from the demand to deliver the product to where it is needed. If you’re a farmer in Kenya and have been following the news, you’d know that the government is planning to open processing plants and launch large-scale exportation of avocado.
So, if you farm in an area that allows the fruit’s growth, you know to strike while the iron’s hot.
2. Invest in transformative products/services
Even the rich learn from each other. Retired American basketball player Shaquille O’Neal says he quadrupled his net worth of $300 million (Sh30 billion) after he adopted an investment strategy learned from Amazon founder and CEO Jeff Bezos. O’Neal once heard Bezos mention that he invests in products that can change lives. “Whenever I do business, it’s not about the money,” said the athlete turned businessman who’s invested in companies such as Krispy Kreme, Google and Apple.
3. Invest 75 per cent
Still on O’Neal, the businessman invests 75 per cent of his income. Early in his career, after burning through $1 million (Sh100 million) in under an hour, O’Neal learned that money wasn’t always going to be there. Learning how to save most of his income changed his outlook on wealth. “I met a gentleman one time. He had a piece of paper, he said, ‘This is $100.’ The man proceeded to rip the paper in half and then told me, ‘smart people invest this $50 and then they have U$50 left. But the wealthy people take half of that $50 left and put that away’. So I started doing that.”
4. Get out of debt
Building your net worth will give you financial freedom. However, this is easier said than done when you are in debt. Car loans, credit card loans, student loans – all these work against you when you’re calculating your net worth. To get out of debt faster, pay more than the minimum payment. Get a part-time job that will boost your income, and then use that money to pay off your debt. Get rid of unnecessary expenses – the best way to go about it is to have a budget plan. Learn how to invest and then spend, and not vice versa.
5. Save for your retirement
If you don’t have an individual retirement plan, work on getting one ASAP! The most difficult thing about opening a retirement savings account is deciding which company to use. Most pension funds invest your savings in options like mutual funds, stocks and government bonds. This will give you an opportunity to invest in long-term growth, as an investor. Just make sure that the company you use is listed by the Insurance Regulatory Authority in Kenya.
6. Have assets that increase your wealth
Of all your purchases, which ones would you say have increased your wealth? Arguably, one could say that, if you have land, that’s your most valuable asset. Your home, while in essence considered an asset, doesn’t count as a revenue maker if you live in it. It would need to be a rental. Any asset, including jewellery, vehicles and collectibles, can increase your net worth if they add monetary value. These items’ value is affected by trends. Their market value changes over time – what might cost thousands of shillings now might sell for pocket change in the blink of an eye. However, your bottom line is affected by large assets, such as rental properties, land and your home.
Article Source: https://www.standardmedia.co.ke/business/article/2001358379/6-ways-to-raise-your-net-worth