If one of your financial resolutions was to grow your net worth this year and you haven’t made progress, don’t throw in the towel yet. All you need to get going in the right direction is a good game plan.
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No matter if you’re looking to gain assets, save more or decrease debts, the right strategies and a proactive approach can help you reach your goals. Here’s how to grow your net worth, according to financial experts.
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Buy Cash-Flowing Assets
Alec Kellzi, CPA at IRS Extension Online, said that one of the most reliable paths to building a sustainable net worth is to put together a portfolio of income-generating assets that provide positive monthly cash flows.
“This could include buying rental houses, investing in dividends stocks or bonds or purchasing a franchise business with dependable revenues,” he explained. “Identify asset opportunities aligned with your goals and risk tolerance that will pay you daily while potentially appreciating over the long term too.”
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Turn a Hobby Into a Side Business
Kellzi also suggested turning your hobby into a lucrative side business while keeping your day job.
“For instance, if you are a social media marketing expert, find startups or solo entrepreneurs who will pay for your services,” he said. “Having that secondary revenue source opens up options for eventually pursuing your entrepreneurial ambitions full time if desired.”
Reassess Insurance Coverage
“While often overlooked, ensuring you have the proper insurance coverages from life to disability to liability can protect your wealth,” Kellzi said. “However, avoiding being overly insured can also save money over time. Review all policies through a wealth-building lens to ensure they align with your current situation and needs.”
Maximize Retirement Matches
According to Kellzi, millions of people leave free money on the table every year because they don’t max out retirement account matches from their employers.
“If you are not taking full advantage of that match, you are just needlessly suppressing your future net worth potential,” he said. “From maxing retirement account matches and health savings accounts to scoring subscription service deals, you will be stunned at how much value you are leaving on the table.”
Save and Invest Consistently
“Aim to save/invest 10% to 20% of your income,” said Brandon Galici, CFP and founder of Galici Financial. “If you want to retire early, shoot for more than 20%.”
A good way to build up your savings balance is to pay yourself first. Set up automatic transfers from your paycheck to your savings account each time you get paid so you don’t have to think about it.
Increase the Value of Your Business
“If you’re an entrepreneur, you can invest money in your business to grow revenue, develop systems and ultimately increase its value,” Galici said. “This can put you in a position to sell it in the future to help fund your retirement.”
Galici offered a reminder that business owners should be mindful of how much of their net worth is tied up in their business.
“If you don’t have other assets (brokerage and retirement accounts), you may have less control over when you retire as it could take some time to find a buyer.”
Decrease Your Debts
Galici said it’s important to pay off your debts if you want to increase your net worth.
“Paying off high-interest debts means more money in your pocket to spend and save each month instead of being wasted on interest charges,” he said.
Galici recommended the debt snowball strategy, debt avalanche strategy or a debt consolidation loan as options for paying off your debts.
Debt Snowball Strategy
Galici said that the debt snowball strategy entails listing all debts from smallest to largest and then making minimum payments on everything but the smallest debt. He said to throw all the money you can toward the smallest debt to pay it off. Then, he said, take the money you were paying toward the smallest debt and pay it toward the next smallest debt, and so on.
“This strategy can help you achieve ‘quick wins’ by completely eliminating certain debts,” Galici said.
Debt Avalanche Strategy
“The debt avalanche approach involves listing your debts from the highest to the lowest interest rate,” Galici explained. “You make minimum payments on everything besides the highest interest debt, which gets any…
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