I love tracking my net worth — it’s the true barometer for my overall financial health.
When I started tracking in 2010, I had a -$50,000 net worth. Essentially, I owed a lot more than I owned. Too many student loans and too many days living paycheck to paycheck I suppose.
That negative number got me motivated though. I saw a challenge and I wanted to conquer it. I thought, “I’m not a negative guy. I’m a positive guy! I’m going to do something about this sorry financial state of mine.”
Fast forward 8 years later, I not only charged into positive territory, but my net worth is now hovering around $750,000. That’s an $800,000 swing in 8 years!
Here are the 5 key strategies I used to increase my net worth during that time period.
Pay Off the Student Loans
During my MBA program, I had racked up around $30,000 in student debt. I knew those loans with a 6.8% interest rate were dragging me (and my net worth) down.
My wife and I decided that we’d live on half of our household income to quickly clobber the debt balance fast. Reducing our restaurant spending and saying “no” to get togethers with family and friends was difficult at first, but over time it became second nature. And eventually, our friends and family became supportive of our new debt freedom mission!
Our diligence and marital partnership together did the trick! The student loans were paid off within 12 months. We were debt free … except for that lease car of mine.
Buy a Reliable Used Car and Drive it for a Long Time
Although my car payments weren’t too high ($250 per month), I thought having no car payment would be even better. That extra $3,000 per year could go toward other net worth building opportunities!
I figured if we could pay off $30,000 of student loans in one year then surely we could save up the same amount to buy a reliable used car that I could drive for decades to come. And that’s exactly what we did.
I had my eyes set on a 2010 Audi A4 Avant (my wife called it a “grocery getter”, but I preferred “station wagon”) and surprisingly, there were only 5 left in the whole country. The closest one to me was in Manhattan and I lived in Michigan. So I booked a one way Spirit airlines ticket to La Guardia and purchased my new car in cash. I drove the 13 hours back home to Michigan the next morning with a big smile on my face.
Today, that car only has 90,000 miles on it and, with proper maintenance, I think it’ll last me another decade or more.
No car payments! Woo hoo! (And here's why you should reconsider buying a new car.)
Take the Salary from 5-Figures to 6-Figures
During this time, I was working hard at my full-time job. I worked in sales so the more I produced, the more I got paid.
When I started out my net worth journey in 2010, I was making $60,000. If I wanted to truly grow my wealth, I knew I needed to get into 6-figure territory soon. It was time for me to sell, sell, sell.
For the next few years, I ensured that I fully understood my performance and sales goals and then ... I crushed them. Year after year, I would earn commissions, raises and bonuses for my performance. Those new monetary rewards helped me earn a consistent 6-figure income year after year.
With that higher income and our family’s ability to live on half, our net worth continued to grow.
Automate Retirement Investing
After I learned about “net worth”, my next favorite discovery was the term “compound interest”.
This term refers to when your investments earn interest and then you earn interest on top off that interest. And so on and so on until you’re wealthy. This is essentially how the rich keep getting richer. No wonder Einstein called it the “8th Wonder of the World!”
The first and easiest way for me to take advantage of compound interest and boost my net worth was with my workplace 401k. This pre-tax retirement savings vehicle helped to quickly drive up my net worth. Not only did I get compound interest growth from the longest bull market in US history, but my company matched 15% of my contributions as well.
In addition to the 401k, both my wife and I have been contributing to Roth IRAs for the last 8 years as well. This is a post-tax investment option that has allowed us to invest in index mutual funds. We’ve avoided the “hot investments” and have gone for the “boring, but proven” options instead.
The retirement investing process for both the 401k and the Roth IRAs has been easy because we’ve completely taken it out of our hands. We allow automation to take control so we don’t have to. My 401k contributions automatically come out of my check at work. Our Roth IRA contributions are automatically invested each week and we don’t have to lift a finger. It’s easy and it works!
Pay Off the Mortgage Early
Most recently, my wife and I paid off the mortgage on our $400,000 home. No student loans, no car payments and now we have no mortgage payments … ever … again.
When we paid off the mortgage, that took the last liability off our net worth chart. We don’t owe anyone a dime and we’re thrilled about it.
With the housing market continuing to grow, the value of our home has grown as well. This helps our net worth to climb higher and higher every day.
As we sit at a $750,000 net worth today, we are thinking about what other steps we can take to continue growing. Real estate investing, small business development and after tax brokerage investing are all areas that sound exciting to us.
A $1,000,000 net worth before 40 years old would be an incredible goal to achieve. It’s worth a shot!