How to Build Wealth Based on Your Net Worth

Have you ever wondered what it takes to build wealth? One way of building wealth is by growing your net worth. So, how do you build wealth based on your current net worth?

To build wealth you’ll need more assets than liabilities. Assets include everything you own. This may include property, a car, stocks, bonds, business, retirement funds, liquid assets etc. Liabilities on the other hand includes everything you owe. This may include your mortgage, vehicle finance, credit card debt, personal loan, student loan etc.

Knowing what your net worth is gives you a clear picture of your current financial situation. It also provides you with a reference point that allows you to achieve your goals.

To calculate your net worth, you’ll have to subtract your assets (what you own) from your liabilities (what you owe). If you want to grow your net worth, you’ll have to grow your assets. However, you’ll want to focus on growing the right kind of assets. Depending on your current net worth, some assets are more important than others.

The chart below shows which type of assets you should focus on based on your current net worth.

The chart groups net worth tiers based on their net worth figure. For example, all five-figure households were grouped together ($10k-$99k), all six-figure households were groups together ($100k-$999k) and so on.

(image source – Visual Capitalist)

Assets that build wealth

Assets includes anything that a business or individual considers valuable. Let’s have a deeper look into the asset classes shown in the chart above.

Liquid assets

Liquid assets includes anything that can be easily, quickly, and securely converted into cash. This may include stocks, saving accounts, paintings, jewellery etc. To build wealth you don’t necessarily need to grow your liquid assets. This asset class will grow organically as you start earning more. However, as the graph suggests, the wealthier you become the less liquid you become as well.

You want to have at least 5% – 10% of your wealth in Liquid assets.

Primary Residence

Your primary residence makes up the biggest chunk of your wealth, until you reach the $1M to $10M mark. That’s because your primary residence is your most expensive asset up until that point. The more you pay off your mortgage the greater this asset will become. Your property value will also increase over time as the market changes.

If you can, start investing in property and start building your wealth through real estate.


Notice how the vehicle asset takes up the second largest asset class when you have $10k or less. And that asset decreases the wealthier you get. That’s because a vehicle is a great asset to have when you’re less wealthy.

Although a car loses a lot of value over time, the function of a car will allow you to be productive. Without a car you won’t be able to get to work or run your own business. In that regard, a car becomes extremely valuable to someone who does not have a lot of wealth.

However, a vehicle become less of an asset the wealthier you get because it becomes a status symbol. You won’t necessarily drive around in your 15-year-old Golf if you can afford the latest Tesla.

Retirement (Pension fund)

Your retirement fund plays a huge role in helping you become a millionaire. Your retirement fund offers tax relief which helps build wealth in the long run. You can set aside 27.5% of your annual income or reach the year-on-year cap limit of R350 000 (and 27.5% limit), all tax free. However, the limit include any contribution you make towards a workplace pension or provident fund.

Take advantage of retirementfund benefits available to you. Aim to reach the R350 000 limit each year. Even if you don’t reach that amount, that money will come in really handy when you need it most, when you can no longer work. And best of all, you won’t pay tax on that money until you withdraw it.

Life insurance

Life insurance features consistently throughout the assets chart above, which shows how important life insurance really is. A good life insurance plan offers financial security in case of any unforeseen circumstances.

Make sure you have a life insurance policy in place. In time, you’ll be able to afford better life insurance policies the wealthier you become. Eventually you won’t need to upgrade your life insurance policy and other assets will make up majority of your wealth creation.

Mutual fund

When you invest in a mutual fund, you invest your money along side other investors. When you put money into a mutual fund you buy shares or units of a particular fund. The S&P500 or Satrix40 are examples of mutual funds.

There are a lot of mutual funds that you can choose from. These funds are generally safer to invest in compared to individual stocks or bonds.

These assets become larger the wealthier you are because you’ll have more money to invest.

Building wealth through mutual funds takes a long time. You’ll also need to invest a lot of money before you see a significant return. Therefore, these types of assets become more important the wealthier you become.

It might be a good idea to start investing in mutual funds from an early stage to get used to this type of investment.


Investing in stocks can be a great way to build wealth, if you know what you’re doing. However, like mutual funds, investing in individual stocks takes time and money before you see a decent return. Investing in individual stocks is also a lot riskier.

This only becomes a wealth generator once you have a significant amount of money to invest. The more you invest, the greater your return may be.

Fixed income investments

Fixed income investments is focused on the preservation of capital and income. This generally includes government and corporate bonds, Certificate of Deposits (CD’s) and money market investments.

Fixed income investments are one of the smallest wealth generators throughout the net worth tiers. This indicates that these assets are not a strong wealth creator, but it may help build some wealth along the way. 

Find out more about fixed income investments here

Managed assets (trusts)

A managed asset like a trust is a vehicle that allows you to manage how you leave your money behind. You may want to leave money behind to your spouse or provide a financial boost to your kids once they’re done with school. A trust allows you to control who gets what, and when they should get it.

You place assets into a trust which will be managed on your behalf. Those assets can be transferred to family members or charities of your choice.

Real estate (rentals/vacation properties)

Notice how real estate is one of the main drivers for wealth creation if your net worth is below $100M. It’s clear that real estate is a great way to build wealth, but it takes a long time. Once you’ve reached the $100M mark, real estate also become less desirable as other assets take up majority of your net worth.

Once you’ve reached a net worth of $100M you may not have the time to deal with tenants and property maintenance etc. You may be more focused on building your business instead. Which is the business assets makes up a larger pool of wealth creation.

Business interests

The key to growing wealth is by running your own business. You don’t need the next big idea, instead start something that you can grow and sustain over time. If you really want to build wealth,you’ll have to start a business and grow that business into something great.

If you own a business you have the opportunity to collect the profits, but you can also sell the business. That’s where you have the opportunity to really make a lot of money.

How to build wealth?

If you’re just starting out, the best way to build wealth is by focusing your attention on the assets that best suits your current net worth. Start by increasing your primary property, vehicle, retirement, and liquid assets. Once those assets grow and achieve maturity, start exploring other assets that will grow your wealth even further.

The most important thing to consider when building your own wealth is to have a plan. You can’t truly build wealth without a concrete financial plan. Create your own wealth building plan that you can stick to.

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