Increasing net worth is like a game. As you “level up” it gets more sophisticated, but you have to start somewhere. So before you’re ready to invest, there are other beginner methods you can work on watch that nest egg grow. You can actually increase your net worth without investing, and you will set yourself up for real growth.
Increasing net worth from ground zero (or below)
The endgame for net worth pushers is to invest. invest. invest. I’m guilty of this too. It’s the most lucrative way to make passive income and grow your savings, but investing when you’re loaded with debt or don’t have a ton of money to spare is scary. And arguably irresponsible.
Investing isn’t smart for everyone, but that’s only because not everyone is at the right point in their financial lifecycle.
But at the end of the day, your net worth is calculated the same way as Beyoncé’s.
NET WORTH = ASSETS (what you own/equity) – LIABILITIES (what you owe/debt)
These steps will grow your net worth and simultaneously get you ready to invest. So here we go.
1. Get a handle on your expenses.
The very first step to building your net worth is to get a handle on your expenses. Most expenses are universal and will follow you around forever. Things like car insurance, groceries, personal care like haircuts, and taxes (how could I forget about taxes?). We can’t stress too much about those.
But if you’ve never taken a real good look at your bank accounts, then you will be amazed by the opportunities you’ve been ignoring. Once you see which expenses are chipping away at your income, it’s so easy to find stuff to cut.
I’m not telling you to become extreme frugal. I’m saying you will be shocked to see how much the little expenses you think are helping are actually hurting (or just not worth it).
Your latte habit isn’t going to ruin your life, but it will definitely make you rethink your spending. Your desire for new furniture or home improvements are totally acceptable. This thinking was the beginning of my love of DIY, but it didn’t stop there.
For example, how much do you want to spend eating lunch during the work week?
When I started budgeting for real, I saw my husband was spending about $100 a month at vending machines at his office (the kind that take cards lol). It was DISTURBING, to say the least. I asked him how much he thought he was spending on those energy drinks and little snacks, and he couldn’t even guess. It wasn’t mindless spending, because he thought it was cheap.
He was thinking it was the responsible choice, but when I laid out that $100 figure he decided it wasn’t worth it.
And THAT is what I’m talking about.
Get to know your expenses sooner than later, and get intentional with where your money is going (and start prioritizing your excess cash).
I built out a whole budget spreadsheet system for planning and tracking your budget intentionally. It’s been incredibly successful in helping my family finally track everything without turning it into a part time job. Snag yours below:
2. Pay off your debt.
After you get familiar with your expenses you can make big moves in the debt payoff game. Your debt payments are just another expense after all. Because of this it feels normal for most people to just be in debt. Credit cards and car payments are normal, right? (spoiler: sadly yes, but that’s sad)
One time, my mom actually told me “everyone is $30,000 in credit card debt!” My heart still aches from that statement.
She honestly believes that debt is not only normal but a life sentence. Just the cost of being alive. But debt payments do not need to follow you forever.
It feels like an uphill battle, but there are some tricks to make it faster and easier. And we already covered the first one.
- Lower your expenses
- Overpay on your debt
I paid off my student loans in under 5 years without a good job for about 4 of those years using only those two steps. Seriously.
This is a huge factor in your net worth. I’ve recently started sharing my net worth monthly with my email list and am always happily surprised to see my net worth grow even without saving too hard. This is because paying off debt is the easiest way to increase your net worth.
By paying off debt, you’re freeing up income to save. And because of that, I don’t think it’s irresponsible to start investing before you pay off all of your debt. As long as you are aggressively knocking debt down and can see an end in sight, it’s smart to build a solid emergency fund and start investing. ***As long as you stick with this and the next two steps…
3. Stay out of (bad) debt.
Pay it off, and keep it off. It sounds like I’m talking about weight, and I kind of am. Getting into debt is an unhealthy habit, although there are times when it’s useful! Like when Christian Bale gained weight for that movie. You know the one. He was nominated for an Academy Award. I’d call that good debt/weight!
Good debt is the kind that makes you more money or increases your net worth. That’s why mortgages and student debt aren’t the worst. A good deal will appreciate over time, and rental properties will increase equity AND your monthly income.
And student debt is almost unavoidable for higher education these days. Unless you’re born with socioeconomic privilege, school is downright unattainable without a tall stack of scholarships or a job that offers tuition reimbursement (which are not always easy to come by).
Some gurus are staunchly anti-student-debt, but I am not one of them (and yes, I’m a self-proclaimed guru). If you go into debt for the purpose of making more money by growing your skills/expertise/marketability then I would typically approve.
Financing anything with a loan is borrowing from your future PLUS interest. So the expected future earnings need to be worth it.
More on that later. But the short list of bad things to go into debt for:
- regular expenses (groceries, eating out, activities, etc)
- cars (this is new on my list)
The common thread on my bad debt list is this: there are frugal alternatives. You need to avoid debt that you could afford if you downgraded the quality or quantity.
Regularly revamping your wardrobe is not necessary, and neither is brand new clothes (especially if you’re in the habit of regularly revamping your wardrobe). See thredUp and thank me later 😉
Crazy nice furniture is an awesome investment, but not the kind that you should be paying for into the future. Score something cheap and save to pay for your dream couch with cash.
Cars are new to my list because 1. I just paid off one of our cars and 2. not having a car payment is not only amazing, it’s realistic. I used to think all cars came with a payment unless you or the car was old, and now I have every intention to never have another car payment. Issa goal with my monthly expenses/net worth in mind.
4. Make and save more money.
After you’ve wrangled your expenses into submission and stopped spending money on things you don’t want to spend money on, there’s only one way to go. You cannot increase your net worth by cutting expenses alone. You need to pay off debts and stay out of debts, but then you need to increase your income and save as much as possible.
I know it’s not as easy as “asking for a raise”. That is not realistic for most jobs. Modern work is weird. There, I said it!
The best way to increase your income is by creating new income streams. I made a list of ways to make an extra $100 a day to give you the idea. There are alternatives to getting a promotion or starting a second job, and thank god for that. There is no way I could work MORE. Like a wise woman once said, “ain’t nobody got time for that”. Moms, especially.
But using your limited spare time with profitable hobbies, or distract yourself by learning a new skill or finding ways to make more money or anything that stops you from spending. That is practically my motto. If my hobbies aren’t making money, then they better not be making me spend too much money.
5. Find people who will talk about money with you
Talking about money is still taboo for too many people out there. Luckily it’s common conversation for plenty of people. I am one of them lol. And just like anything, you get better with practice.
And the only way to practice talking about money and growing your understanding and acquisition of wealth is to talk about money with people on the same journey.
Bonus points for finding someone a few steps ahead of you. Money mentors, so to speak.
My net worth goals and progress skyrocketed when I started asking the hard questions and really digging for answers about big money. And you’d be surprised the things you can learn from your circles.
I was shocked to learn that some people I thought were good with money actually aren’t and discovering the unsuspecting winners in the net worth game. And out of the winners, learning how their successful methods vary.
The most important thing about success is that there is not one way to achieve it. No matter what your definition may be.
How to get to the investing part of net worth
Nothing bothers me more than the when someone advises you to just do something. Everything is easier said than done. So let’s glaze over the most important “how to” method that you can grasp right now.
Get woke about your money mindset
Everyone has a TON of preexisting beliefs surrounding money, whether you realize it or not. So it’s incredibly important that you know what yours are (and if you’re cool with them). Right now, you believe that you want to grow your net worth but you aren’t ready to invest.
There are so many [hilarious] memes and things floating around that joke about having $12.72 in your bank account and still planning your vacation. I fully support that and can totally relate. But that itty bitty bank balance is definitely messing with your head!
When we see these, it becomes normalized to us to have a small balance. It’s relatable. It must be normal and maybe it is, but it doesn’t have to be. You can literally decide what is your normal. You do it with your hygiene habits, exercise routine (or lack of), and everything in between. Your money is no different.
I have a friend who has always made big money moves. Only aiming for lucrative careers, getting his college education paid for by his employer, the works. I remember when we first started talking about buying houses (while we were super young and it was still out of reach at the time). He said “I want to have at least $1000 in my bank account at all times if I own a home”.
And I was like whoa! Smart but ok yeah that’s a thing you should have, I guess.
Now I look back and laugh. At the time, my 20 year old mind literally could not imagine having that kind of money just chillin’ in my bank account. That kind of money would be spent “because I have it” and because it didn’t have another purpose.
I see this all. the. time. Be honest here, do you feel more comfortable making impulse buys when your bank account goes over a certain number? Like, do you justify retail therapy because your balance is feeling flush?
If you really want to increase your net worth, that “certain number” needs to increase. Your beliefs around desirable balances need to go up.
As long as you are walking around without a figure in mind, you will only be working toward the figure you already know. Which could be nothing!
And THAT is the idea of a money mindset. The little things we know to be true and can’t imagine realizing. I recently read some dude talking about how he has $1.2 million in monthly income. Needless to say, that blew my mind. I’ve been working on my money mindset for a while now, and hadn’t grown my thinking to that level. I’m still pumped at the goal of making $10k a month.
To sum it up
The baby steps to increasing your net worth are as follows:
- Know where your money goes and get good at cutting expenses
- Pay off debt
- Stay out of debt
- Make & save more money
- Uncover some money mentors (& peers!)
If you implement these steps into regular new habits, you will increase your net worth without thinking about it. And after some time you’ll be ready & confident enough to start investing for your future. It’s crazy and awesome and actually that easy.