This is a question I am often asked.
First of all, what is net worth?
Your net worth is the difference between what you own and what you owe.
- You own a house worth $500,000
- You have a bank loan of $350,000
- Your net worth is $150,000
There are three principal ways to grow your net worth.
You could, for example:
- Improve the value of your property by doing improvements such as upgrading the kitchen. This will likely allow you to charge more in rent and increase the sale price when selling.
- Pay the mortgage off sooner. Doing this will significantly increase your equity and also there will be big savings in interest.
- Wait for the property value to increase. As time goes by the market usually increases a little but there is no guarantee of this.
Improving net worth can be exciting, however you need to invest in appreciating assets to make this work well. Cars, for example, are a depreciating asset. You rarely get more when selling than it cost you to buy.
Wise property investment will, over the longer term, see your net worth increase.