Are you looking to increase your net worth and grow your wealth?
From setting clear financial milestones to building a strong investment portfolio, we have seven practical strategies, tailored to help increase your net worth. Each method is designed to work for anyone. Whether you’re already investing like a millionaire or just starting your financial journey, these strategies will empower you to make informed decisions that align with your long-term financial goals!
Practical Strategies to Increase Your Net Worth
Here are seven actionable ways to grow your net worth.
1. Set Milestones to Gage Net Worth Growth
Setting goals gives you something to work toward. And it’s motivating to see measurable progress being made toward your goals.
So it makes sense to start your pursuit of a higher net worth by setting goals.
Now, you could set a goal like this: 10 years from now, I will have a net worth of at least $10 million. But that’s not actually all that helpful. Because it doesn’t give you a plan for hitting that number. And a goal without a plan is just a wish.
Plus, what if you don’t hit that goal? How demoralizing!
Instead, build a plan into your goal by focusing on leading indicators (the actions you can take to get where you want to be).
And instead of an unwieldy 10-year time frame, set your time horizon sooner, which makes it easier to stay focused on your goal.
Here is an example of a strong net worth goal: Over the next 3 years, I will acquire assets that add $2 million to my net worth while paying down $1 million in debt to further increase my net worth.
2. Establish a Budget
Budgets are a smart financial tool because they allow you to prioritize your spending based on the things that matter most to you. Then you can spend guilt-free on your favorite things, knowing that your expenses, debts, and savings are all covered.
To create a budget, simply list your monthly income and expenses. Then look for ways to adjust your recent spending to better reflect your values and preferences.
For example, if increasing your net worth is important to you, perhaps you can allocate more of your income to investing. This would require you to cut spending in another area. Maybe you see that you’re spending a lot of money on subscription services you rarely use. By canceling those subscriptions and funneling that money to investments, you’re spending more efficiently and boosting your net worth painlessly.
3. Create a Debt Management Plan
Leveraging debt can be a smart investment strategy. After all, financing can allow you to purchase high-value assets likereal estate that you would otherwise have difficulty accessing. But debt drags your net worth down. High-interest debt is particularly detrimental because it costs you money that could be put to better use.
Low-interest debts, like first mortgages and student loans, may not need to be paid down on an accelerated schedule. In fact, paying these debts off early could prevent your net worth from growing as much as it could. If, for example, you have a mortgage with a 5% interest rate, and a real estate investment opportunity with returns estimated at 15%, using your money to pay down your mortgage instead of investing in the real estate deal would give you a net negative.
Having said that, paying off high-interest debts, like credit cards and hard money loans, early could save you a small fortune in interest while growing your net worth.
If you have high-interest debt, consider using a “debt snowball” or “debt avalanche” to quickly reduce your debt. Both methods involve putting extra money toward debt repayment each month, even if it’s only $100. You choose one debt to focus on and put your extra money toward that focus debt while making the minimum payments on other debts. Once that focus debt is paid in full, you take the amount you had been paying on that debt and direct it toward the next focus debt in line.
With the debt snowball method, you begin with the smallest-balance debt first, working toward the largest-balance debt. With the debt avalanche, you start with the highest-interest-rate debt first, moving toward the lowest-rate debt. The debt avalanche is more efficient, but many borrowers are motivated by paying off accounts with smaller balances first, as the debt snowball method does. Either method is better than simply paying the minimum balances on all accounts.
4. Increase Earnings
As long as income increases are funneled toward purchasing assets that hold their value, increased earnings will boost your net worth. And there are many ways to increase your earnings. Consider the following options:
- Get a raise. Negotiate a higher salary or wage for yourself.
- Find a higher-paying job. Change employers or even industries.
- Starting your own business. Bet on yourself by launching your own company. Just know that it is a risk. And even successful companies can potentially take years to turn a profit.
- Generate passive income through investments. There are several ways to create passive income from real estate, for example. And real estate has the added net-worth-building benefits of long-term appreciation and tax advantages as well.
- Start a side hustle. In our gig economy, many people are monetizing their spare time and hobbies. Side hustles are often inexpensive to launch, and with a little planning, you can start a side hustle in just two weeks.
- Consider house hacking. House hacking is when you use your home to generate income. Many homeowners house hack by renting out an ADU (accessory dwelling unit) to a long-term tenant. But if you’re looking for something less intrusive, you could rent out storage or parking spaces on your property.
- Combine forces with your partner. Depending on your household situation, family dynamics, and your partner’s wishes, you may be able to work together to grow your combined net worth. For example, if your partner has been a stay-at-home parent, maybe they’re ready to rejoin the workforce. A fulfilling job could give them an outlet outside of the house while generating more income for the household.
5. Build an Investment Portfolio
Smart investments are one of the best ways to increase your net worth because they increase the value of your assets. And there are just so many ways to invest! You could, for example:
- Create a traditional securities portfolio of stocks and bonds.
- Build a real estate portfolio, which could consist of properties you own directly, online real estate investments, or both.
- Explore alternative investments, like precious metals, commodities, art, and infrastructure.
If you’re looking for the benefits of investing in real estate, but don’t have the experience or time to maximize your ROI, consider investing in real estate syndication. Syndication pools funds from multiple investors to finance a specific real estate project (such as a house flip or a multi-family development). A real estate sponsor professionally manages the project, so your returns are completely passive!
The sooner you can start investing, the better. Early investing gives you more time to take advantage of compounding to grow your net worth exponentially.
If you are already a high net worth individual (HNWI), you should focus on high net worth investing strategies, which are specifically tailored to your needs and resources.
6. Manage Tax Liabilities
As your net worth grows, so do your tax liabilities. It is always a good idea to discuss your income, assets, and debts with a tax professional to make sure you’re not over-taxed due to poor management or missed opportunities.
Depending on your financial situation, you could potentially benefit from:
- Tax-advantaged retirement accounts, like 401(k)s and IRAs.
- Deductions on real estate investments, including rental property depreciation.
- Lower capital gains tax rates.
- Appealing the property taxes on real estate holdings that are over-valued by the tax assessor.
7. Protect and Preserve Your Wealth
It’s a universal truth that the more you have, the more you have to lose. So as you increase your net worth, you also need to take greater care to protect your assets and preserve your wealth.
Start by reviewing your insurance policies to make sure they provide enough coverage for your assets. If you are a high-income earner, and your family relies on that cash flow to sustain their lifestyle, you may also want to consider a life insurance policy.
As you build generational wealth, it’s also important to create a plan for efficiently passing your wealth along to your children and grandchildren. An estate planner can help you establish a will and any trusts you may need to transfer wealth to future generations.
Increase Your Net Worth with Gatsby Investment
Here at Gatsby Investment, we understand the complexities of real estate investment and the challenges individuals face in building wealth. As a real estate syndication company, we offer access to exclusive investment opportunities traditionally available only to the wealthiest and most experienced investors. Our syndication model allows individual investors and fund companies alike to benefit from exceptionally high return potential without the complexities of direct property ownership.
We invite you to leverage the knowledge, skills, and resources of the real estate experts here at Gatsby. Let us handle the intricacies of your real estate projects while you focus on growing your net worth and achieving your financial goals!