Whether you earn a little or a lot, there are ways to increase your personal wealth. The truth is, being financially independent isn’t only reserved for the wealthy. You don’t have to be born with a silver spoon or receive the best financial education to grow your net worth. However, you do need to make smart financial decisions throughout your life.
Ways to Increase Wealth at Any Age
1. Don’t cash out your retirement accounts
As soon as you find a job after college, speak with your employer or a financial advisor about starting a retirement account. This can include a 401(k) or an individual retirement account, such as a Roth IRA or a traditional IRA.
The earlier you start saving for retirement, the more money you’ll have in your later years. Although planning for retirement early is one aspect to building personal wealth, it’s important that you don’t touch this money. This can be challenging, especially as you watch your retirement accounts grow.
Some people borrow from their retirement accounts to buy a house, complete home improvements or start a business. But even if you repay your retirement savings, the growth potential of your account weakens until you’re able to replenish the account. Only borrow from retirement accounts as a last resort — after you’ve exhausted other options.
2. Buy beneath your means
It’s normal to purchase a house or car, and most people finance these purchases. However, getting a loan ties up your money for several years. And since many creditors charge interest, you’ll end up paying more than the actual price for a house or car.
Understandably, you need these things. Yet, it’s important to buy beneath your means; and if possible, increase monthly payments to pay off your house or car early. You’ll save on interest, and without a payment, you can put extra money in your retirement or personal savings account.
3. Repair credit to qualify for better rates
Your credit score and history directly impacts the interest rate you receive on home loans, car loans and credit cards. However, you can save money when financing by repairing your credit. If you can improve your score, qualify for a better rate, and subsequently reduce your house or car payment, this frees up cash for savings.
“Millions of Americans have credit scores that are not accurate assessments of their credit risk,” says Lexington Law.
Fortunately, there are several ways to fix credit and save on loans. Keeping your debt low helps, as does paying bills on time. Also, if you discover negative items on your credit report, working with a credit repair company to remove these can raise your personal rating.
4. Advance your career
If you’re in a dead-end job, consider ways to advance your career, which can open the door to a higher paycheck. Another option, freelance in your spare time to generate extra income.
If you live in a dual-income household, see if you can live off one income, and then deposit the majority of the second income into your savings.
5. Be a cheapskate
Being frugal gets a bad rap, but if you spend money wisely, you’ll have more cash for savings or investing. For example, always look for deals when shopping for clothes, shoes, electronics and any other item that you need. When planning a vacation, travel during the off-season to save on airfare, car rentals and hotels. Do you like to dine out with friends? If so, get together during lunch and take advantage of cheaper specials, or share an entree with your partner. The savings may seem minor, but they add up quickly.
6. Re-think your savings account
A personal savings account keeps cash liquid, but you won’t earn an impressive interest rate. Explore other savings options, such as a certificate of deposit, an online high-yield savings account or a money market account. These accounts feature higher rates, which can grow your money faster and build your wealth sooner.
You’re not getting any younger. Therefore, now’s the time to get serious about your money. If you develop a frugal mindset and always look for opportunities to save, you’ll be closer to achieving your financial goals.