Have you ever wondered what you need to earn to become a “balling” elite in nigeria? About once in every quarter, TwitterNG—the section of Twitter with many Nigerians at home and abroad, makes speculations on what that amount should be. Last month, it was N400,000. Many people still make the mistake of thinking their net worth is the same as their income which leads to the debates around how possible it would be to have the life of your dreams in Lagos state on that amount because the cost of living is high. What if we told you you could earn N400,000 but have a net worth that is way higher than that? Continue reading to find out what we mean!.
What is your net worth?
Now that you know what net worth is not (It is not your income), let us explore what it is.
Net worth is the difference between your assets and liabilities. Wait! Before the non-accountants leave, let's break it down. An asset is anything of value to you—anything you can attach a monetary value to that belongs to you. From the cash in your bank account or wallet, your laptop, car, basically anything you can exchange for money today. Liabilities, however, are debts you owe—anything from a loan to things you bought on credit and are yet to pay.
Summing it up, your assets are what you own, your liabilities are what you owe, and your net worth is the difference.
You see now, how even if you earn the smallest salary, if you have a lot of assets or minimal liabilities, you can still live a good life?
So, the focus shouldn't only be on earning more—although this is very important, increasing your net worth is more important. To do this, we must break apart the net worth components and look at making them better. That is, improving your assets and reducing your liabilities. Before we jump into that, it is important to note that the first step to building a sustainable net worth is to get an idea of “what you are worth” - we have created a simple and easy to understand quiz to help you determine your net worth, you can check it out here.
Use what you have to get what you want.
Remember, we already stated that assets are what you own. First, the most straightforward and most accessible asset class is cash! This may be in the form of a salary you earn, gifts, income from sales or a business you do—name it! Any form of cash in your hand or bank account is one of the ways to increase your assets.
The cash you earn depends on the value you offer. If its a friendship, what do you contribute to your friends to make them give you more money? If it's a job, what skills do you have that can make you earn more? To increase your revenue, you have to think of improving the output of the organisation you work for, so you can negotiate for higher pay.
The price of something, including the job you work for, is determined by demand and supply factors. If your company is demanding someone to fill a role, and many applicants can perform well at the position, and the company has just a few slots, they can reduce the salary because they know many people will fill the role. So, what do you do? You increase your skills to fill in positions that are not very accessible to everyone.
What can you do that no one else can to improve your company's productivity? Whether you work for an organisation or own a personal business, enhance your skills and the value you offer to negotiate better.
But remember, your income is not an asset; other assets are investments—think stocks, real estate and other forms of investment. While this piece is too short to tell you all you need to know about investing, you need to add this to your asset portfolio. This is the kind of asset class that can give you passive income—you make money without even lifting a finger, sweet, right? Depending on your goal, you have to make enough income first to enable you to set some aside for investment, speak to an investment expert about your goals and start investing.
Finally, the second half of your network are your liabilities. Even if your assets are enormous and you're a chronic investor, if your liabilities are still more than your assets, you're taking on step forward and two steps back. You have to cut down on your liabilities to make room for your net worth to grow. Pay off debts, reduce expenses that make you run into those debts, so your assets have room to grow.
It's pretty straightforward, but the real deal is in the doing. Want to ball on your N100,000 salary? Increase your net worth!