If you’re trying to escape the nine-to-five grind, the most important consideration is your net worth. The amount of capital you have working for you is the greatest predictor of your freedom. The more the merrier.
The reality, though, is that most people have no idea what they’re worth. If you asked them, they couldn’t tell you. And that’s a problem. Freedom is all about increasing the amount of money that you have invested that works for you. To rid yourself of your day job, you need at least five figures per year in passive income.
Of course, the question for many is “how do I get there?” But first, you need to know what you are worth.
Calculating The Value Of Your Assets
To figure out what you are worth, you need to first calculate the value of your assets. Assets are basically anything you own or anything that other people owe to you.
Here’s a list of assets that you might have:
If you’re not sure how much a particular asset is worth, you can get help. An expert witness is someone with experience in valuing assets and telling you what they’re worth.
Of course, assets are only one side of the equation. On the other hand, you have liabilities.
Liabilities are everything that you owe other people. This includes your mortgage and all other debts. You should also include any depreciating assets you own in this category too.
Once you have figures for both your assets and liabilities, you need to subtract liabilities from assets. The resulting figure is your net worth, hence the word “net.”
If your net worth is above around £1.5 million, you’re said to have a “high” net worth. About 2 percent of the UK population fall into this category, and they tend to be much older people with an average age well into their fifties.
The average household net worth in the UK is around £250,000. That’s even when you subtract people’s mortgages. However, that may change if there is a housing slump.
Net worth is something that tends to grow exponentially over time. As people get older, the rate at which their net worth increases accelerates. That’s because you have more capital working for you every year. Once you get past the £100,000 mark, life starts to get easier. And once you hit around half a million, that’s when you can really get the party started and think about taking a break from incessant work.
For the most part, increasing net worth is a long game. You need to commit to doing it for many years before you’ll get the big payoff you want.
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Author - Chris
Author, Editor, Creator of Learn Develop Live