Accumulating wealth within a brief timeframe may appear daunting, particularly if you lack a financial head start. However, strategic decision-making, discipline, and a willingness to take risks can substantially enhance your prospects. Explore six avenues to boost your financial success within just five years.
Invest and Invest Some More
The primary method for expanding wealth, as advocated by financial expert Ramit Sethi on CNBC earlier this year, is through investing. He advises automatically allocating a percentage of your income each year and progressively raising that percentage by 1.
“We commonly assume that wealthy individuals have exclusive access to clandestine investments, attributing their substantial earnings to these undisclosed opportunities. However, from my own access to such investments, I can affirm that they generally do not outperform a straightforward S&P index fund.”
Always Negotiate a Better Salary
Receiving fair compensation for your skills, whether through negotiating at your current workplace or seeking a higher-paying job, is a crucial step with enduring benefits. A higher salary serves as an immediate catalyst for income growth, forming the bedrock of wealth accumulation. This increased income provides the means to save and invest more substantially, propelling your overall financial advancement.
Skyler Fernandes, a finance expert and founder/general partner at VU Venture Partners, emphasizes that when negotiating for a better salary, it’s essential to consider more than just the monetary aspect. Beyond financial increments, many employers offer non-monetary perks such as additional vacation days, flexible work hours, or opportunities for professional development.
Fernandes underscores the significant financial impact of these non-monetary benefits. For instance, extra time off can directly reduce personal expenses, while investing in professional development can pave the way for higher-paying positions in the future. He suggests that negotiating for a well-rounded compensation package, encompassing both monetary and non-monetary advantages, can be a lesser-known yet effective strategy for augmenting your overall wealth.
Manage Your Debt
Even with a substantial income, progress can be hindered if burdened by a substantial load of bad debt. The presence of high-interest credit card bills can gradually undermine your financial aspirations. To sidestep this peril, consider employing strategies like the debt snowball or debt avalanche payoff methods. Eliminating debt not only liberates a greater portion of your income for saving and investing but also alleviates financial strain. Unshackled from high-interest rates, building wealth becomes more feasible and less encumbered by financial stress.
Keep Your Expenses Low
Even with a six-figure income, living paycheck to paycheck remains a risk without prudent spending habits. Embracing a more frugal lifestyle can mitigate financial vulnerabilities, offering protection against market fluctuations, job loss, or unforeseen events.
According to Skyler Fernandes, managing expenses extends beyond merely creating a budget. He recommends conducting a comprehensive audit of monthly subscriptions and recurring bills, urging individuals to cancel services that are no longer necessary or used. Many unknowingly pay for unused gym memberships, magazine subscriptions, or streaming services. This meticulous audit not only streamlines expenses but also frees up additional funds that can be redirected toward wealth-building endeavors.
Stick With Your Budget
As emphasized in the previous advice, increasing your income is just one part of the equation; the key is also judiciously allocating your earnings. Celebrity finance expert Dave Ramsey underscores this point on his website, stating, “No one ‘accidentally’ wins at anything — and you are not the exception! If you want to build wealth, you have to plan for it.” According to Ramsey, a budget is essentially a written plan for your money. It requires sitting down at the beginning of each month, assigning every dollar a purpose, and steadfastly adhering to that plan to achieve financial goals.
Take On a Side Business
Boosting your income stands out as a prime strategy for rapid wealth building. To set yourself on this path, channel your skills and time into a lucrative side hustle that can generate and amplify your wealth, advises Percy Grunwald, a personal finance expert and co-founder of Compare Banks. In the digital age, entrepreneurship has become more accessible, offering the potential for a second, possibly passive, source of income.
As your side business expands, there’s the prospect of substantial revenue, often accompanied by tax advantages, Grunwald notes. When exploring opportunities, consider aligning your skills and talents with market demand. Identify what you’re widely recognized for, both personally and professionally, and what others consistently seek your assistance with. This insight can guide you in defining potential avenues.
Whether you lean towards offering professional services through freelancing, such as writing or tutoring, or opt for a product-based business like creating an ecommerce store, the key is to invest in a side hustle that propels you toward your five-year financial goals.
Grunwald emphasizes the importance of a balanced approach, stating, “Accumulating money quickly involves balancing maximizing revenue with minimizing expenses.” Research entrepreneurial opportunities, practice frugality in spending, and negotiate for a higher salary, he suggests, as these steps contribute to accelerated financial growth.