With inflation continuing to take a toll on household cash flows, getting financially ahead can feel almost impossible. But by implementing even a few smart strategies you can boost your net worth faster than you may think, even in tough economic conditions.
If your aim is to create a secure nest egg, you’re not alone. A 2023 study by financial services company Empower found that 56% of people have financial goals, and 92% of them believe they can achieve them at certain life stages.
While the process of saving and investing is simple on the surface, getting started and maintaining progress can be a challenge. As motivation, here are nine ways to grow your assets in 2024 — and in years to come.
1. Minimize Spending Waste
Almost everybody wastes money from time to time, but every dollar you spend on something that isn’t important is a dollar you don’t save for something that is. It’s time to refine your cash flow so you can keep waste to an absolute minimum.
Develop an individualized, flexible budget. It will enable you to make key decisions, like cutting unnecessary subscription services or reducing the number of meals you eat out of the home. With a personalized budget, you will free up cash today that you can save and invest for tomorrow.
2. Slash High-Interest Debt
There’s nothing wrong with using loans and credit cards to get what you want, but when financing fees are tacked on, you will have less available funds to save and invest. The higher the interest rate, the more the debt will cost you and the longer it will take for you to achieve your wealth-building goals.
Kendall Meade, a certified financial planner for SoFi, says if you’re hanging on to balances with double-digit interest rates, aggressively paying them off is essential.
“We don’t know exactly what the stock market will do, but you can expect to earn at least 7% over the long term,” Meade says, explaining that debts with rates higher than that should be paid down before saving and investing.
If you can’t delete the balance with a few large payments, explore the following options:
— Negotiate a lower rate. Contact your lender and ask if they will reduce the rate. If you have been a responsible borrower and have a long history of paying your bills on time, they may work with you.
— Get a balance transfer credit card. Want to totally eliminate interest? You may be able to with a 0% APR balance transfer card. As long as you repay the debt within the introductory period, all it will cost you is the transfer fee, which is typically between 2% and 5% of the amount you move over.
— Tap your home equity. “For anyone who has equity in their home and high interest debt, that’s usually the first option I suggest,” Meade says. “A home equity loan or line of credit will normally have much lower interest rates.” Using your home equity to pay off bills can be smart, but be sure you can afford the payments because you’re swapping unsecured debt for debt that’s secured by your home.
— Consider a consolidation loan. Meade also suggests looking into repackaging existing debt into a consolidation loan to secure a lower, fixed interest rate.
3. Bump up Your Income
Can you work a little more for your current employer? Or get a second job or take on gig assignments?
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This can be a very powerful way to boost your assets, so you may want to push yourself. Apply every additional dollar you earn to your wealth-building goals. It doesn’t have to be a permanent arrangement, but rather a method to jump start your savings.
There are only so many hours in the day, so if you’re tapped out, look for ways to earn.
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For example, if you have an extra room in your house, you may want to rent it out. If you exercise by walking or running, offer to take a neighbor’s dog with you for a set price. Or, sign up for a ride-sharing company like Uber and Lyft, so you can make extra money on your off hours or while you’re out doing errands anyway.
This could also be the perfect time to ask for a raise. If you haven’t had one in a while, and you believe you’re due, gather your courage and schedule a meeting with your boss or human resources department.
4. Turn to Tech
Once you’ve freed up as much cash as you can by budgeting, reducing the cost of existing debt or increasing your income, you’re ready to save.
[READ: How to Create a Saving Strategy]
Take the guesswork out by automating the savings process. Via your bank, arrange recurring transfers of a certain amount every month from your checking account into a savings account. Schedule the transfer soon after your paycheck is deposited so you won’t overdraw your account before more funds are added.
You can also use any number of personal finance apps that are designed to help you invest your savings. These include Betterment, Robinhood and Acorns, which are excellent choices for beginner investors.
5. Secure Assets With an Emergency Fund
As you’re working hard, budgeting and earning as much as you can, take action to protect yourself with an emergency fund.
Return to your budget and identify how much you need as a bare minimum each month to get by. Total that figure up and multiply it by at least three. If you lose your job, you’ll have enough cash to meet your basics for a few months while you’re searching for a new position. So, if you determine that $2,000 will be necessary each month, aim to save $6,000.
“Without it you are also at risk of unexpected expenses derailing your investment plans,” says Stephen Kates, a certified financial planner at Annuity.org. “It protects your long-term investments from being used at an inconvenient time. You don’t know what the future holds.”
So where to keep the money? Kates suggests a high-yield savings account. Your assets will be liquid so there are no penalties for the withdrawal, plus they’ll be earning a solid return.
6. Take Advantage of High-Yield Certificates of Deposit
Once you have accumulated a bulk sum of money that you can tuck away for a while, consider putting at least some of it in a high-yield CD.
“CDs can be good for the medium term, such as a year or two years,” Kates says. “They’re great for saving for something like a house, when you have an end date for your goal. Because you can lock your savings in, and remove yourself so the money is out of your reach, it’s really helpful.”
Your assets are guaranteed to grow, too. For example, if you invested $10,000 in a CD with a 24-month maturity and it offers a yield of 5%, you would have earned $1,025 just by setting it aside for two years. Keep in mind that there’s often a penalty – typically equal to three months worth of interest payments – if you redeem a CD early.
7. Try Target-Date Funds
When you want to build wealth by investing but with few decisions on your part, a mutual fund that automatically recalculates the investment mix over time can be ideal. Target-date funds are a mix of stocks, bonds and cash that adjust your allocation the closer you get to your goal.
“I think target-date funds are an excellent solution for long term goals, like saving for retirement,” Kates says.
“It’s hard for most people to wrap their head around investing so this puts your money in the right allocation and lets you step away. Target-date funds are good for most people. They facilitate growth, while getting yourself out of the way,” he adds.
8. Fully Fund Your Retirement
Eventually, your working days will be behind you, so building your assets to use later will save you from having to rely too much on Social Security.
If your employer offers a sponsored plan, like a 401(k) or 403(b), sign up to contribute the most you possibly can. “Fifteen percent of your gross income is a good target,” Meade says. The amount you have deducted from your paycheck reduces your taxable income, thus lowering your tax obligation.
Additionally, if your employer matches contributions, Meade says to jump on it. It’s free money from the company that will be invested, empowering your own contributions to grow even faster.
9. Reduce Your Tax Obligation
Lowering your tax bill is also a way to grow your assets because you will have more money to save. There are many simple and legal methods to keep the amount you send to Uncle Sam down.
For example, if you have a high-deductible health care plan, Kates recommends opening a health savings account (HSA). Your deposits are tax-deductible, investment growth is tax-deferred, and the money is tax-free when you spend it. It’s a triple win.
When it’s time to file your income taxes, be sure to get all eligible deductions and credits for which you are entitled. According to Turbotax, the most commonly overlooked deductions in 2023 were:
— State sales taxes
— Reinvested dividends
— Out-of-pocket charitable contributions
— Student loan interest paid by you or someone else
— Moving expenses
— Child and dependent care credit
— Earned income tax credit
— State tax you paid last spring
— Refinancing mortgage points
— Jury pay given to your employer
Know When You Need Professional Guidance
Eventually you may want to bring in a credentialed professional to help you grow the money you have so diligently socked away. People with the CFP designation
have completed coursework in key areas — from taxes to retirement saving — and have passed a board exam.
“These are fiduciary advisors who can help you meet your goals,” Kates says. “Look for a fee-only CFP for unbiased advice. They’re great if you have very specific goals you want to meet, are a small business owner, or have a big life transition happening, like a divorce.”
Can you do it all on your own? Yes, but the more complicated your needs, the more important it will be to obtain expert advice. The last thing you want is to make a costly mistake.
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9 Ways to Grow Your Assets in 2024 originally appeared on usnews.com
Update 05/17/24: This story was published at an earlier date and has been updated with new information.
