ProBlogger is having another group writing project centered around the "top 5" theme and I'm playing along with my top five steps that will grow your net worth. They are:
1. Spend less than you earn. Without this tip, nothing else matters. Why? Because you'll always be going backwards financially if you spend more than you earn. You'll go deeper in debt, won't have any money to save or invest, and certainly won't be growing your net worth. But if you spend less than you earn, you'll be laying down a firm foundation for all your other financial efforts. That's why spending less than you earn is my best piece of financial advice.
2. Increase your income. The best way to do this is to make the most of your career by going to college and then managing your career to get the maximum pay increases possible each year (By the way, this also helps with item #1 -- it's easier to spend less than you earn the more that you earn.) Or if it's "too late" for you to make a lot of extra money this way, join those of us who are trying to earn an additional $10k this year by taking some creative steps to earn extra money.
3. Save and invest to get up to a 100% return. Save the surplus you've created from points #1 and #2, and invest it wisely in an employer-sponsored 401k. Put in enough to get the full employer match. It's a no-brainer investment where you earn 50-100% return automatically (depending on your employer's plan/match). Where else can you get such a great return?
4. Get out of credit card debt. It's a great way to earn a 20% return on your money -- and relatively easy to do if you've completed steps 1-3 already and have a bit of discipline.
5. Invest your savings regularly. Once you've got the full 401k match from your employer and paid off all your credit cards, it's time to crank up your net worth to new heights with additional saving and investing. Personally, I prefer index funds. Save and invest as much as you can for as long as you can -- letting the power of time and compounding work for you. Simply doing this can make you rich all by itself. ;-)
Of course there are other solid financial tips such a buying a house, paying off the rest of your debt, and the like, but if you concentrate on the top five listed here, you'll make the most progress possible towards growing your net worth.
I've found a way to do both #1 and #2--mystery shopping. Before #2 was born I did it more frequently, but now I mainly do restaurants. My husband and I are going out to a VERY nice restaurant tomorrow night, for free! And we won't go out again until we have another shop. So that's both saving money, and (sometimes) getting extra money.
Posted by: Mama Money | May 07, 2007 at 05:00 PM
[...]I was perusing the list of first-day entries for Darren Rowse's Top 5 Group Writing Project. Great stuff[...]
Posted by: Q at $1 Million to My Name - Great top 5 lists at problogger.net | May 08, 2007 at 02:23 PM
These are all important to increase your net worth. Some people focus on making money, but that is not enough. The true measure of financial health is your net worth, so if you spend all the money you make you will not do well financially.
Good luck with the group writing project.
Posted by: ww-success | May 08, 2007 at 10:26 PM
Nice top 5. See your link here:
http://www.freetipsandwits.com/moneymakingblog/2007/05/top-5-tips-to-win-probloggers-top-5.html
Good luck!
Posted by: MoneyMakingIdeas | May 09, 2007 at 06:24 PM
Hi
Nice top five
I like the way you write. Straight forward and direct.
Thanks for the finance tips
Tom
Posted by: Tom O'Leary | May 10, 2007 at 07:07 AM
I've been a reader for some time, but this is my first comment... inspired by the Top 5 project. :-)
Very classic financial Top 5... I'm afraid to say, I'm stuck in #4. But, working on it. Awareness is the beginning of the solution. What's your opinion on using retirement savings to get out from under? That answer is probably in one of your posts... but, a pointer would be helpful! You are a very prolific writer, and it's hard for me to keep up... especially with this writing project giving me so many more blogs to read!
Stop by and check out my Top 5 if you like...
Posted by: Dan Chase | May 10, 2007 at 09:14 PM
excellent!! I will be back and I will be adding you to my top 5 today on my blog. very useful information.
Posted by: darlene | May 12, 2007 at 05:07 AM
nice post. check out my post: Top 5 ways to go broke - http://moneyshaker.blogspot.com/2007/05/top-5-ways-to-go-broke.html
Posted by: Adventures In Money Making | May 14, 2007 at 02:19 PM
6. Do not RENT, buy your home if you can afford it. Even with ammortization schedules eventually you will be pay more and more principal.
Posted by: Pepsi Jobs | July 24, 2008 at 01:17 AM