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If you’re serious about building financial stability and long-term security, then you’re probably looking for ways to grow your net worth.
While a steady income is the root of all financial security, your net worth also reflects your ability to achieve long-term financial goals and overcome unforeseen financial obstacles. Whether it’s planning for retirement, saving for a home, affording college for your children or simply building up the reserves to weather a loss of income, your ability to meet those challenges is directly affected by your net worth.
Building up your net worth requires a long-term strategy, but there are things you can start doing today to improve your net worth and build toward greater financial prosperity and security. Here are seven strategies you may want to consider to accelerate the growth of your net worth.
1. Start contributing to retirement accounts early.
The earlier you start making contributions to a retirement account, the faster your money can start increasing in value and generating income of its own. These retirement accounts contribute to your net worth and give you long-term stability as you plan for retirement.
Even if you have to start small, every dollar you invest early on can start earning its own profits and building your net worth.
2. Always earn all of your employer’s 401(k) matching contributions.
Does your employer match a percentage of your 401(k) contributions? If so, do everything you can to earn the full match.
Matched 401(k) contributions are free money in addition to your income from that employer, and they can quickly increase your net worth. Find out what your employer’s matching limit is, and prioritize contributions that will earn this full amount every year.
3. Max out your personal retirement contributions.
Once you’re able to afford maximum contributions to your 401(k) or other savings account, you should try to prioritize these savings and reap the full benefits of these investments.
Whether you opt for tax-deferred accounts, taxed accounts or a combination of the two, your contributions will strengthen your financial outlook for decades to come.
4. Keep your savings in interest-bearing accounts.
Every individual or household needs access to cash reserves that aren’t tied up in investments or blocked from access by retirement account restrictions.
But this doesn’t mean that money has to sit idly by. By placing this money in an interest-bearing savings or money market account, you can earn a small dividend from those funds while also shielding them from losses that might be suffered if that money was invested.
5. When your earnings increase, keep your living expenses the same.
Most people see their income gradually increase throughout their career. While it’s tempting to respond to pay raises by increasing your standard of living, doing so actually uses up the excess income you could be putting toward increasing your net worth.
Even if you plan on increasing your standard of living eventually, use income increases to add a little extra money to your investments and your savings. This will accelerate the growth of your net worth and give you more financial security ahead of raising your standard of living.
6. Consider buying used vehicles — and upgrading less often.
One of the biggest ways consumers waste money is by upgrading their vehicle and buying new. The average new vehicle costs 26.8% more than the same vehicle from the previous year’s model. This adds up to thousands of dollars that would be better spent building up your net worth.
Try to hold onto your vehicles longer whenever possible, and if you want to get the most value from vehicles and prioritize your net worth, settle for a nice, gently used vehicle.
7. Prioritize paying off your highest-interest debt.
If you own different types of debt, focus on repaying the highest-interest debt first. This will reduce the amount of interest you pay over the life of the debt and free up more of your income to invest in your net worth.
This debt repayment strategy is known as the “avalanche method,” and it’s your best option for minimizing interest payments and keeping more of your net income in your pocket.
Unless you win the lottery or inherit a large windfall, building net worth is a process that takes place over years and decades and is the product of smart money management, saving and investing. Your local credit union offers a range of financial products and resources available that can support your efforts to build net worth over time.
Start leveraging these resources and tools today. Become a member by opening a checking account.
