A few days ago I posted about whether you should focus your efforts on saving money or earning more money. Clearly, the best option is to focus on both. Widening that gap between income and expenses is the easiest and quickest way to start to build significant wealth.
Today I wanted to share with you some ideas you can use to start to build that wealth without thinking about it too much.
Start Tracking Your Net Worth
Probably the best way to starting growing your net worth is to start tracking it. If you think about it, what’s the first thing you do when you want to lose weight? You start weighing yourself. Once you start weighing yourself regularly, you start to not only pay attention to your weight, but you also begin to unconsciously look for ways to cut calories, exercise more, and do what you can to shed some pounds.
In other words, you will think twice before having that bowl of ice cream after dinner.
The same is true with your net worth. If you are trying to grow your wealth, one of the best ways to do this is by starting to track your net worth. You don’t have to do this daily, but regular checks can make a big difference.
But here’s the key, you have to include everything.
Awhile back, I started tracking my net worth on personal capital, but excluded my student loans because I knew that by including them, I would have a negative net worth. (In addition, my login credentials didn’t work on Personal Capital). This was too depressing to me, so I just left them out!
But now I include my student loans as well as all of my investments in my total net worth picture. I also track these numbers monthly and make them public.
Since I have started doing this, I’ve become obsessed (I hope in a good way), with everything I can do to increase my net worth number. My goal is to pay off our house and reach our financial independence number by the time I’m 50 (right now I’m 41, I think this is a very realistic goal).
Use Tools to Automate Your Savings
We live during an amazing time. Back when I first graduated college in 1998, I had to spend several hours each month writing out checks to pay my monthly bills. Now, not only can you automate those bill payments, but I suspect that many people never use checks at all.
One of my favorite tools that I’ve come across in the past several weeks is called Acorns. What acorns does is round up all your purchases to the nearest dollar and then deposit those differences into an investment account for you. The money is automatically allocated to a mix of stocks and bonds according to your risk profile.
Since I opened my account about a month ago, I’ve already invested $86.22, which is currently worth $87.47 as a result of market gains. And the best part is that I barely notice this money leaving my bank account because the amounts are so small.
Round Up Your Debt Payments
Another great way to quickly build wealth is to round up your debt payments. For example, my car payment is $230 per month. By rounding this payment up to $250 or even $300 each month, I don’t necessarily notice the difference in the payment, but I could cut down the term of the loan from 4 years to 3 years or less.
You can also do this with your mortgage payments and student loan payments. I have recently added 1/12 of a mortgage payment to each of my monthly mortgage payments, effectively reducing the remaining term of my mortgage from 22 years to 18 years. In addition, I’m actively looking to refinance my mortgage to a 15-year mortgage with a lower interest rate.
If I were to apply that same strategy (pay 13 mortgage payments per year instead of 12), I could further reduce the term of my mortgage to 13 years.
Sell Stuff You Don’t need On Amazon or Craigslist
As I write this, I am settling into my new window office. I can already feel more productive having sunlight in my office. But as I moved down the hall, I noticed lots of crap that I don’t need. Things that were in boxes that I hadn’t looked at in months. Old books. You name it, I’ve got it.
And that’s just my law office.
My garage at home is an entirely different story. I’ve got a TON of stuff that I could sell. Stupid stuff that I don’t need and certainly don’t need taking up space in my garage.
Enter Amazon and Craigslist. You don’t have to sell everything at once. But try putting one item per week online to sell and see what type of response you get. What’s the worst that could happen? Nobody responds?
In that case, you could donate your old stuff, or even just throw it out.
So I’m going to start right now. Here is my first listing!
Pay Ahead Your Bills by at Least One Month
Awhile back, I heard an idea from someone that was taking a one-year sabbatical. Instead of automating their utility payments each month, this person just paid their utility and related bills in advance for 12 months.
Now, this is a bit extreme, and I’m not suggesting you pay ahead your bills by 12 months. But by taking the same strategy you would use to pay ahead your debt payments, you can also pay ahead your regular bills. For instance, if your water bill is normally $100, pay $120 instead. After 5 months, you have now pre-paid your water bill for an extra month.
You can do this for your utilities, including your water, gas, electric, and telephone bills, as well as any other bills that you pay periodically.
If you use YNAB, this is also considered one of their fundamental rules. But with their software, rather than paying ahead your bills directly with the vendor, you can simply do this with your YNAB account.
Once you have prepaid all of your regular bills, you should start putting money aside (the equivalent of one month’s salary) into a separate savings account. This will allow you to start living off of “last months income” and extend the life of your money.
Which Method to Grow Your Wealth Will You Try?
So there you have it. 4 quick and easy ways to start growing your wealth today. Do you have some ideas on how to build and grow your wealth that I missed? Please feel free to comment below and let me know!