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, 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.”
To accumulate more wealth in 2023, try these suggestions from financial advisors serving high net worth clients:
[Read: How to Calculate Your Net Worth.]
1. Update your budget.
2. Boost your savings.
3. Pay off debt.
4. Increase your retirement contributions.
5. Invest in yourself.
6. Lower your tax bill.
7. Advance your career.
8. Audit your insurance.
1. Update Your Budget
If you already have a budget — and hopefully you do — analyze and update it. If you don’t have one, make one now.
Brian Stivers, investment advisor and founder of Stivers Financial Services in Knoxville, Tennessee, says you should start the year by evaluating your monthly budget in buckets of “important lifestyle expenses” and “nonessential expenses,” the latter of which might include a gym membership or dining out.
“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 you could put toward retirement or in a savings account, start setting that money aside every month.
If your budget is already in good shape, consider going a step further and creating a financial plan.
2. Boost Your Savings
If you don’t have one, you need a savings account. It could also serve as your emergency fund but you need grow it so that if an emergency arises you’re borrowing money from yourself, not a bank. That means you’ll take on less debt, which will increase your net worth.
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 enable you to take advantage of it. As long as you’re paying your bills, there’s no downside to fattening up that account and increasing your net worth.
3. 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, and being in debt is one of the quickest ways to rack it up.
Your net worth represents your 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 your debt quickly but that when you repay credit card debt, always pay more than the required minimum.
4. Increase Your 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%, 2% or more. If you make small, additional contributions every paycheck it 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 says. “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 instead of only saving or only paying off debt.
[READ: 10 Reasons to Delay Retirement]
5. Invest in Yourself
While it’s always smart to invest in your future by putting money toward retirement or your kids’ futures, 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.
According to Coursera, a U.S.-based online course provider, graduates with master’s degrees make an average of $81,848 per year versus graduates with bachelor’s degrees, who make an average of $69,368. In addition, the site notes that those with master’s degrees experience less unemployment than those with bachelor’s or associate degrees (4.1% and 5.5%, respectively).
Note that it’s important to weigh your potential earnings against graduate school debt.
Additionally, if you hire a career or financial coach you might get insight that leads 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.
6. Lower Your Tax Bill
Everyone should pay their fair share, of course, but taking advantage of tax breaks will help you grow your net worth.
For example, the child and dependent care tax credit and lifetime learning credit directly offset your tax liability. 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, why not?
[Read: 10 Tax Credits You May Qualify for This Year]
7. Advance Your Career
Advance your career by asking for a raise, working toward a promotion, applying for a new job or starting your own business.
Other ways to get your career in gear include developing new skills that will be useful beyond your current position, seeking feedback from your supervisor to measure your goals and ensure you’re on the right path to achieving them, building your professional network and volunteering for stretch assignments that might showcase your skill set to others.
8. Audit Your Insurance Coverage
Insurance can be extremely costly, as self-employed people with health insurance or parents who insure teenage drivers can tell you.
Maybe you have excellent insurance. But if you cringe every time you pay your monthly health, life or car insurance premiums, or you wonder if you’re getting a good deal on your homeowners or renters insurance, comparison shop.
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.
More from U.S. News
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Increase Your Assets: 8 Steps to a Higher Net Worth in 2023 originally appeared on usnews.com
Update 02/03/23: This story was published at an earlier date and has been updated with new information.
