Building wealth is essential to pursuing financial independence. Wealth creates opportunity, yet it evades a lot of people. This is because many people simply look for ways to get rich quickly.
The reality is that wealth creation takes time, effort, and a touch of luck. Unless you were born into means, getting rich doesn’t happen overnight.
If you want to become rich, here’s how to increase your net worth effectively.
How to Get Rich
To become wealthy, you need to have a solid financial plan. You also need to be committed to pushing yourself to grow in various ways.
Here are nine realistic steps to follow to increase your wealth that you can implement today.
1. Set a Clear Goal
Unless you plan on stumbling into wealth, you won’t become rich overnight. Consequently, having clear goals is vital before pursuing any challenging endeavor.
Look at your situation and ascertain what you ultimately want to achieve. For example, if you want to build a net worth of $1,000,000, set a specific date to reach that goal.
Since becoming wealthy is such a momentous goal, you want to break it into chunks to help ensure success. This can keep you accountable and give you something to measure your progress.
I did this when I began to pay off $50,000 in debt. Then, my wife and I did something similar when we started to grow our wealth. You want to do the same and personalize it to your specific goals.
How much do you need to be rich? This is not always an easy question to answer, but it’s important to look at your individual situation to determine your goal.
2. Create a Plan
You’re less likely to achieve financial goals without a plan. A plan puts meat on the bones of your goal. While there is some luck involved in becoming rich, it largely results from hard work and planning.
You may want to do things like create a budget and identify investment opportunities to make your money work for you. Regardless of what you include in your plan, you should revisit it regularly.
Keep in mind that apathy isn’t your friend. A detailed plan will challenge you to put in the effort necessary to grow your wealth. Again, personalization is key to ensure success.
3. Pay Yourself First
Paying yourself first sounds difficult, but it’s simple. It’s also a significant player in your financial stability.
Here’s how to pay yourself first:
- Sign up to have your paycheck deposited electronically
- Transfer a set amount of the check to a savings account, such as one with CIT Bank
- Transfer money into a retirement account or some other investment vehicle
- Contribute money to an HSA if you have a high-deductible health plan
If your employer offers a 401(k) plan, you also want to contribute enough to at least receive the company match. These funds are taken out of your paycheck before you even receive them.
Most banks and other financial institutions allow you to automate transfers so you won’t have to do it manually.
Paying yourself first is essential to creating your wealth. Think of it as giving every dollar you have a purpose. Instead of just sitting in your checking account, it goes to work for you and puts your plans into motion.
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$100 minimum deposit requirement
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4. Start Investing ASAP
Investing in the stock market is integral to becoming rich. In fact, you want to start investing when you’re young to put yourself in the best position possible.
It’s also an excellent way to double your money. The average return is roughly nine percent over the past few decades, making it a great opportunity to grow your net worth.
Here’s how long it will take to double your money with different returns.
|Average Annual Return||Years Needed|
It’s a common myth that there’s no way to invest with little money. However, that’s not the case anymore. Many brokerages let customers open accounts with $100 or less.
It’s best to start investing sooner rather than later since it gives your money more time to grow. The sooner you start investing, the less money you must use thanks to compound interest.
If you’re a new investor or don’t know where to start, Betterment is a fantastic option. The robo-advisor invests your funds for you with minimal cost.
After you tell them your goals, they put your money to work to reach those goals.
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Cost: 0.25 percent of account balance, annually
From beginners to pros, Betterment offers lots of helpful tools and a powerful investing platform.
5. Avoid Debt Like the Plague
High-interest debt is the enemy of wealth. It erodes your cash and restricts you from having more money to invest.
In essence, you’re making a creditor richer by paying their astronomic interest rates.
That was the situation I faced. Making minimum payments kept me from pursuing wealth.
It wasn’t until I refinanced my credit card debt to a lower rate that I was able to kill my debt. If you’re facing a similar situation, you may want to try this strategy.
Credible is an excellent resource to compare rates and start attacking your debt. Remember, you are improving your net worth as you pay off debt. That’s essential to getting rich.
6. Reduce Your Expenses
Saving money is overlooked by many people who want to improve their finances. But, if you want to get rich, you can’t afford to overlook money-saving opportunities.
You can cut only so much, but any savings you achieve can instantly help you work towards wealth creation. These funds can pad your savings account and fund other investment opportunities.
In short, less stuff equals more money to use to your advantage.
If there are things you can’t envision cutting, look for low-cost alternatives so you don’t have to sacrifice too much. This will help you achieve your goal faster and still enjoy life.
7. Increase Your Income
Reducing your expenses plays a key role in becoming rich, but this strategy is limited. Additional income is unlimited. You want to combine the two to enhance your efforts.
Making more money can take on many forms. Some ways to increase your income include:
- Starting a side hustle
- Finding a higher-paying job
- Taking on additional responsibilities at work
- Starting a business
If you’re stuck on where to look to make more money, delivering for DoorDash is a great opportunity. You can work on your own schedule and earn up to $20 per hour, including tips.
Use those earnings to fund wealth creation ideas or attack debt, and you’ll be surprised how effective the additional funds will be at intensifying your efforts.
8. Create Passive Income
If you want to become a millionaire, having multiple streams of income highly improves your chances. Studies show that self-made millionaires have at least three streams of income, if not more.
Your paycheck is only one form of income, so it’s risky to depend on that alone to build wealth. That’s why residual income is so helpful.
Passive income protects you when one stream is struggling, and it helps maximize your efforts to become rich.
Here are the seven common income streams:
- Stock dividends
- Rent from real estate investments
- Sales of products you own or create
- Capital gains from selling appreciated stocks or investments
- Business profits
- Interest from savings, CDs, or bonds
Some of the above may be more challenging to begin. Others, like investing in real estate, are more attainable thanks to crowdfunding.
For example, Diversyfund is an awesome platform you can use to invest in residential real estate. You only need $500 to get started.
With each source of income you add, the better your chances are of becoming wealthy.
9. Grow Yourself
If you want to know how to become rich, you have to remember that you are your best tool to become wealthy. This is why it’s so important to invest in yourself. Educating yourself can help your efforts in countless ways.
This can include anything from learning more about your field of work to learning more about investing. Either of these (and everything in between) directly impacts what you can earn or improve returns.
Many self-made millionaires are that way because they’re always looking for ways to learn.
Each learning opportunity may not always bring positive returns, but it puts you on better footing to take advantage of events that may transpire.
Get Rich Schemes to Avoid
If you do any internet searching for how to get rich fast, you will find some “opportunities” that are either scams or not worth the effort.
Others may work but often involves significant risk. Here are get rich quick schemes that you want to overlook.
MLM, or multi-level marketing, is popular with many people. Multi-level marketing goes by various names, including:
- Relationship marketing
- Network marketing
- Referral marketing
- Direct marketing
In most instances, these are pyramid schemes and will only result in stress and debt. Less than one percent of people who get in MLM earn a profit, according to the FTC.
You’re largely only making money for someone else, and you earn pennies on the dollar. A representative may pitch it to you as a way to start a business.
In most cases, it’s not. It often requires you to buy tons of products to sell to your friends. Then, if you’re not successful, you’re stuck with products and no profit.
Playing the Lottery
Dreaming about winning the lottery is fun. Who doesn’t love the idea of buying a ticket, winning, and being able to sip tropical drinks on a secluded beach?
Unfortunately, this idea is just not feasible. You’re far more likely to get hit by lightning than you are to win the lottery.
Instead of spending your cash on the lottery, use those funds to pursue an honest wealth-building opportunity. You’ll be better off in the long run.
I spoke with a lot of day traders when I was a stockbroker. The allure is understandable, and it is possible to make money as a day trader.
However, studies show that less than ten percent of day traders are profitable. The others lose money or end up in debt because they’re trading on margin, otherwise known as borrowed funds.
If you want to pursue this avenue, doing your due diligence is necessary. You can start with a small amount of money if you wish, but know that there’s significant risk involved.
Becoming wealthy is attainable, but it does require time and work. It’s not something you will achieve by being apathetic or not stretching yourself professionally and personally.
It’s highly unlikely that you will get rich overnight, but it is possible to become wealthy over the course of a decade or two. If you pair your efforts with wise decision-making and ingenuity, you’ll find success.
What’s your favorite way to grow wealth? How often do you monitor your net worth?