How to Achieve Your Dream Net Worth
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We hear a lot about net worth when it comes to the rich and famous, but we don’t hear too much about net worth when it comes to the average American. There is no conspiracy here. The reason we don’t hear much about everyday people’s net worth is because their net worth tends to go unmentioned.
In 2019, the median net worth was $121,760, according to the Federal Reserve. While it’s nothing to scoff at, it’s also not jaw-dropping – not when you consider that even celebrities who aren’t considered truly wealthy boast net worths of more than $100. ‘one million dollars. The average net worth becomes even less impressive considering that the average American has over $90,000 in debt.
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We are living in particularly difficult times where simply filling our cars with gasoline is simply too expensive without stretching our budgets. The cost of food and other basic necessities is skyrocketing. Homes and cars, two equity staples, are more expensive than ever. The middle class is squeezed out of existence. All of that is enough to make you think, “Well, I guess I’ll live my whole life with a miserable net worth.”
But that doesn’t have to be the case. There are some solid moves you can make to increase your net worth. It may not be the exact net worth of your dreams (Hello, Jeff Bezos!), but it can certainly be much higher than it is today.
Know where your net worth stands now
“The first step you need to take to increase your net worth is to take a snapshot of your current net worth,” said Deacon Hayes, a personal finance expert at Well Kept Wallet. “You do this by writing down what you own and subtracting what you owe. This will show you what your net worth is right now. Then you can start taking steps to improve your financial situation.
Save early and save often
“In your early years on the job, the amount and regularity of your savings matter far more than the return you get on your investments,” said Daniel Patterson, CFP, founder of Sweetgrass Financial Planning. “If you have a thousand dollars in an investment account and you’re getting a 10% annualized return, then you’ve increased your net worth by $100. If you save $250 per month during the year, you have increased your net worth by $3,000. There will come a time when your investment returns will start to matter more as your net worth begins to increase, but you need to start saving money so that your investment gains become more significant.
“A lot of people think they can’t achieve a high net worth, but by investing, especially when your money has enough time to accumulate, it’s very possible to become a millionaire or even a multi-millionaire,” Kaci said. Schmitt, a licensed mental health physician. wealth building advisor and mentor for therapists and other healthcare workers. “For example, a 20-year-old who invests $300 a month in index funds that track the US stock market could become a millionaire in 36 years based on a 10% annual rate of return.”
Don’t be tricked into thinking you need a lot to start investing
Do you think you need a lot of money to start investing?
“It’s not,” said Shang Saavedra, financial expert at Save My Cents LLC. “You can buy stocks for dollars. It’s time that matters most. »
Saavedra added that almost everyone who became rich and did not inherit their wealth did so by investing.
“You may already be investing even if you don’t think so. This could include:
– Employer sponsored accounts, such as 401(k), 403(b), 457(b), Thrift Savings Plan
– A traditional or Roth IRA
– A taxable brokerage using companies like Fidelity, Vanguard, Charles Schwab.
Live below your means
“Granted, living below your means and spending less than you earn may seem limited to some people at first, but the results are motivating and exciting for those who embrace it,” said Alissa Krasner Maizes, JD, Financial Planner and the founder of Amplify My Wealth. “Ultimately, spending less than you earn allows you to build a solid financial foundation allowing for more flexibility and less stress.”
Explore multiple streams of income
“One of the most important steps you can take to build your net worth is to explore multiple sources of income,” said Alyssa Davies, author of “Financial First Aid: Essential Tools for Confident, Secure Money Management” and founder of MixedUp. Silver. “There are seven potential streams: earned, commercial, interest, dividends, rents, capital gains and royalties. You probably already have more than you think.
Davies points out that it takes time to create multiple streams of income, but most of them can be accomplished by opening new accounts online, such as a high-yield savings account or a robo-advisor for your investments. , making them more accessible.
“How do you start? The best thing to do is figure out what options you have: whether you want to monetize a talent, get a part-time job with a company or whatever,” Davies said. realistic without pushing you towards extreme versions of ‘bustle culture’.”
Multiple streams of income are important not only to build up your net worth, but also to serve as back-up plans if your main source of income goes down the drain.
“If you experience an unexpected job loss tomorrow, you know you have a back-up plan or a place to find more income if you need it,” Davies said.
Eliminate Bad Debts and Accept “Good” Debts
“Bad debt is a killer, good debt is leverage,” said Michael Ryan, a financial coach.
“[Bad] debt such as credit card debt means you are spending more than you can afford and comes with an astronomical interest rate. You become the hamster in the financial wheel, running in place.
Good debt, on the other hand, reflects valuable assets like a home or even a business and, if managed wisely, will help you increase your net worth significantly over time.
Celebrate wins and read personal finance books
“Whether it’s tracking your increase in net worth on a spreadsheet or graph or tracking your accounts, celebrate the victories along the way,” Maizes says. “I also recommend reading books such as ‘The Next Millionaire Next Door: Enduring Strategies for Building Wealth’ as they explain how people who increase their net worth live and are a great reminder that you are in good company and the media benefits are not necessarily a measure of wealth but rather of expenditure.
Here’s a look at some other great personal finance books for the summer that can help get you (and your net worth!) on the right track.
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