While your investment portfolio is a big part of the net worth equation — which you can calculate by adding up the value of your assets and subtracting your debt — it’s not the only thing that can potentially contribute to your financial well-being in retirement. Here are five ways to increase your net worth.
1. Buy a house
Depending on where you live and when you purchased your abode, a house can end up being your most valuable asset and a lot of people do sell their home later in life and then use that money to help fund their retirement goals. Real estate can be a great asset because it tends to rise in value over time — though as we saw during the Great Recession, that’s not a guarantee by any means. While renting can be cheaper, and you can then invest the difference and potentially earn more over time than you would on a house, real estate essentially forces you to save. As you pay down your mortgage, and as the value of your property rises, your net will increase.
2. Sell a Business
A business can add a lot of value to someone’s net worth — or not. While many businesses do provide a decent living for their owner, they’re an illiquid asset, often hard to value that takes time to sell. Putting a price on a business is a lot harder than coming up with a sale price for a home, though, so talk to an expert who can help you set a valuation and determine how much your operation may net.
3. Increase your salary
Most people want to earn increasingly larger amounts over their lifetime. The more money you have the more you can save, put toward debt, use on buying other assets and more.
4. Spend less and pay down debt
Decreasing debt increases your net worth, so, over time, do what you can to pay down your mortgage, pay off your car loan and reduce any credit card debt. At the same time, consider cutting back on some of your expenses. The lower your expenses the more you’re worth – and the more you can save.
5. Buy Life Insurance
This is a little different than the rest, but your family’s net worth will, of course, drop significantly if you unexpectedly pass away and can’t earn a living anymore. To protect them, consider buying life insurance. It won’t help you in retirement (though, some kinds do come with an investment component that you can tap into later in life) but it will help your spouse and children stay afloat if something goes awry.