If you’re someone who makes New Year’s resolutions, creating a higher net worth is probably on your list.
Establishing a plan to achieve this goal is a first step, but know that results will not come quickly. As Scott Alan Turner, a certified financial planner in Dallas, says, “Wealth is built over time — not overnight.”
“When I’m teaching people about wealth building, one of the best things they can do is be patient,” he says. “Compound interest works if you let it. The time it takes $500 to double to $1,000 is the exact same amount of time it takes $50,000 to double to $100,000, or $500,000 to $1 million.”
With that said, to accumulate more wealth in 2022, try these suggestions from financial advisors serving high net worth clients.
[Read: How to Calculate Your Net Worth.]
— Update your budget.
— Boost your savings.
— Pay off debt.
— Increase retirement contributions.
— Invest in yourself.
— Lower your tax bill.
— Improve your career.
— Audit your insurance.
Update Your Budget
If you already have a budget — and hopefully you do — analyze and update it. After all, no budget can stay the same for long. You get a pet, add a streaming service or buy a car, and suddenly your budget changes.
Brian Stivers, an investment advisor and founder of Stivers Financial Services in Knoxville, Tennessee, suggests you start the year by evaluating your monthly budget in buckets of “important lifestyle expenses” and “nonessential expenses,” the latter of which might includes a gym membership or dining out purchases.
“Then, make an informed decision on the amount of discretionary income you have for financial goals,” Stivers says. Once you have a number in mind that could go toward retirement or a savings account, start putting that money aside every month.
If your budget is already in good shape, consider going a step further and creating a financial plan.
Boost Your Savings
If you don’t have one, you absolutely need a savings account. Your savings account, which could also be your emergency fund, needs to grow because if you’re borrowing money from yourself, you’ll take on less debt, which increases your net worth. Without a savings account to put money aside and help organize your finances, it’s hard to imagine becoming wealthy.
A savings account is at the heart of any strong financial portfolio. It allows you to manage your cash flow and pay for any unexpected expenses, such as a major car repair, without having to take out a personal loan. If you run into an investment opportunity, a robust savings account may allow you to invest. As long as you’re paying your bills, there’s no downside to fattening up a savings account and increasing your net worth.
Pay Off Debt
Mark Charnet, founder and CEO of American Prosperity Group, in Pompton Plains, New Jersey, says paying off debt is a crucial early step to building wealth. High net worth individuals tend not to pay a fortune in interest.
Your net worth is the sum liabilities minus assets. So as your debt decreases, and your income and assets increase, your net worth goes up.
“First rule of increasing your net worth is debt elimination and should accompany every financial plan,” Charnet says. He adds that you may not be able to wipe out all of your debt quickly, but when repaying credit card debt, you’ll always want to pay more than the required minimum.
However, when it comes to your mortgage, Charnet says there’s currently no need to shell out more than your payment. “Some financial advisors suggest a person would be best to accelerate their home mortgage payments,” Charnet says. “However, with mortgage rates at historic lows, in this financial advisor’s opinion, that is the last thing to do.”
Increase Retirement Contributions
Next, increase funding to your retirement plan. Many experts suggest putting 10% to 15% of your annual income toward retirement. If you’re nowhere near that, aim for saving 1% or 2% more. Small additional contributions, if you’re making them every paycheck, will add up over the years.
In case you’re wondering if you should pay off all your debt and then set up a retirement plan, many financial advisors suggest doing both at one time — assuming it’s going to take years to pay off everything you owe.
“Take a balanced approach to investing the money found in your budget and reducing your debt,” Stivers advises. “If you have $500 a month for financial planning and have credit card debt, take half to put towards the debt and half towards savings and investments.”
You’ll increase your net worth faster, Stivers says, if you try a balanced approach as opposed to only saving or only paying off debt.
[READ: How to Save for Retirement.]
Invest in Yourself
While it’s always smart to invest in your future by putting money toward retirement or your kids’ future, investing in yourself now could increase your net worth.
For example, if you go to graduate school, in theory, you could get a better job. Of course, it depends what type of degree you get. In 2021, the National Association of Colleges and Employers analyzed which master’s degrees tend to lead to the highest earnings. A master’s in biology will earn graduates approximately 87% more than without it. A master’s in accounting will, on average, lead to a 4% increase in salary. You’ll also want to weigh your potential earnings against graduate school debt.
If you hire a career or financial coach, you might get insight that leads you to a promotion. Investing in yourself won’t always help you become rich, but if you think there are roadblocks keeping you from living your best life, fixing those problems may free you up to increase your income and accumulate wealth.
Lower Your Tax Bill
Everyone should pay their fair share, of course, but taking advantage of tax breaks will help your net worth grow.
Tax credits, such as the child and dependent care tax credit and the lifetime learning credit, directly offset your taxes owed. Meanwhile, a tax deduction reduces your taxable income.
If you can lower your tax rate, you could potentially save thousands of dollars. Consider your tax bracket. For example, if you’re single and earn $86,376 a year, your tax rate is 24%. By following the advice of a financial advisor and bringing down your taxable income by just a dollar, say by making qualified charitable contributions, your tax rate would drop to the next bracket — 22%.
Again, no one is suggesting you don’t pay your fair share of taxes, but if you can increase your net worth by lowering your tax bill in ways the government allows you to, such as taking advantage of tax deductions or tax credits, why not?
Improve Your Career
According to the career website Zippia, for example, the average annual salary for any American employee is $47,520, while for a business owner, that number jumps to $95,559. Sure, things may not work out the way you want. Plenty of businesses don’t succeed. But if yours does, and you own a successful business, you could find your net worth go up considerably.
Audit Your Insurance
Insurance can be extremely costly, as self-employed people with health insurance can tell you — or parents who insure teenage drivers.
Maybe you have excellent insurance. But if you are often cringing every time you pay your monthly health insurance, life insurance or car insurance premiums, or you wonder if you’re getting a good deal on your homeowners or renters insurance, do yourself a favor and comparison shop.
For instance, last year, the Centers for Medicare & Medicaid Services released data showing that returning consumers could save, on average, 40% of their monthly premiums because of enhanced tax credits that were passed in the American Rescue Plan Act of 2021. If you can lower any of your insurance premiums without cutting coverage significantly, you could put the savings into your retirement or other investments to increase your net worth.
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