Often when asked, it’ll take me a few seconds of thinking to remember my shoe size, my dress size, or my phone number. Never my net worth; that’s always top of mind. Is that backwards? Considering my priorities and measure of personal success, I really don’t think it is. Don’t get me wrong, I certainly don’t want to give off the impression that a person’s net worth is the be all and end all of how they should be valued and treated as human beings, but I do think it’s a significant qualifying factor as to a person’s success in business. There are a thousand business people and entrepreneurs that can talk a good game, but at the end of the day, the numbers don’t lie.
Your net worth is basically how much money you’d be left with if you subtracted all your debts from all your assets. I put a substantial amount of thought and energy into increasing my own personal net worth, and the habits I’ve developed have proven to be beneficial not only from a personal standpoint, but also for my business and for my family. The simplest ways to increase your net worth are to purchase assets and to pay off debts.
One of the first lessons I learned, however, was that not every asset purchase you make will actually help you build your net worth. For example, a new car, unless it’s a collector’s item or vintage automobile, will depreciate faster than almost any other asset you could purchase. $40,000 spent this year could be worth $10,000 less next year. Any assets you purchase need to at the very least remain stable or ideally increase in value over time. I prefer to increase my net worth by way of real estate properties, artwork and silver bars (a bit of a gamble, but still more stable I find than gold). Others may choose to purchase rare coins, and my mother is partial to handmade Persian rugs. All these things will help in building your net worth.
Another way to build your net worth is to pay off your debts – even if you have to start off with the small ones. Pay off your car loans, your student loans, and your credit cards. If you have to prioritize, start with the high interest debt first, or any other debt where the interest is not tax deductible.
It may also be worth it to use debt to build your net worth. This is especially the case when it comes to investing in real estate, where the debt you incur with a mortgage is being used to purchase an asset that will appreciate in value. This is always a risk of course, since there’s no way to know for sure whether an asset will actually appreciate, but there are lower risks involved if you focus on assets that have a habit of increasing in value.
As a business person, your net worth is an important figure to consider in your financial goals. Decide what your net worth goal is, and then do whatever needs to be done to get there. Work hard, make the sacrifices, and ultimately, you’ll reap the rewards!