Seven Money Principles to Grow Your Net Worth Faster

As the world prepares to enter into a new global recession for 2023, establish your money principles. It’s the only way you will be able to succeed. We’ve held the big R at bay since 2018 but it’s long overdue.

“Global growth is slowing sharply, with further slowing likely as more countries fall into recession. My deep concern is that these trends will persist, with long-lasting consequences that are devastating for people in emerging markets and developing economies,” said World Bank Group President David Malpass.

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Your Personal Economy Will Force You Back to Your Money Principles

In January 2014, I found myself starting over from scratch.

With a maxed-out $5,000 credit card and about $400, I was forced to make it stretch for two months. While I wait on my new job’s paycheck to kick in, there were hard choices like utility deposit versus food. As my funds dwindled, I needed to grow up. I suspect the next few months will push a lot of people to do the same.

Prices are up on just about everything while energy costs are slated to surge through winter. This will not be easy, however, there are things you can implement to manage. This blog post will summarize the seven money principles that helped us build wealth even when money got tight.

It’s time to rethink success and ride the tide from a recession to an expansion.

1. Always Invest First. Then Invest Early and Often

When it comes to investing and building wealth, start early and stay consistent. I’ll keep it brief, you need to start with the end in mind.

Most people start thinking about investing after they’ve spent their money. You would be better served by investing from the onset. This means tapping into your employer-sponsored plan like your 401ks, 403bs, and 457bs. From tax advantage to wealth growth, you can’t beat this approach. On top of that, you are likely to get absolutely FREE matching contributions.

The second and most pivotal piece is reaping the rewards of staying for the long term. There is no greater feeling than watching your money make money for you.

Tap into the power of compounding interest.

Compounding is different from straight-line investing

Let’s say you invest $10,000 in an ETF that grows at a rate of 10% per year. How long will it take to double its value to $20,000? If you thought 10 years, you are incorrect.

With the power of compounding, it’s roughly 7 years to double your money. Basically:

Earning 10% in the 1st year would add an extra $1,000 to your account.
$11,000 at 10% in year 2 grows to $12,100
By year 3 that’s $13,310,
In year 4, you would have $14,641,
When the 5th year ends, that’s $16,105.10
By year 6, you would have reached $17,715.61
and in Year 7, you walk away with $19,487.17.

I played the entire scenario out so that you can see for yourself. An investment of $10,000, nearly doubles at 10% with no extra effort from your part by another $9,487. Imagine if you invested $30,000 annually for 10 years at the historical average of 8%, that’s…

A grand total of $1,422,497. You can supercharge your way to wealth. Even $250 per month at 8 percent for 40 years climbs to an astounding $805,270. A bit of disciplined investing can get you there over time.

2. Stop Inflating Your Lifestyle to Keep Up with the Madness

Wait but where do I get the investment contributions from? Well, that’s money principle #2, stop living like you are on TV. Most people are living scripted versions of other characters that they watched growing up.

Playing make-believe might be fun but it can drown your wealth potential.

Lifestyle creep is a clear and present danger to your life. Everyone wants more money to fix their current problems. However, more money typically leads to new problems that were left unaddressed.

With every promotion or salary boost, it becomes easier to justify the next expense. From new clothes to a bigger home, or a better car, people exchange definitions for Wants to Needs.

These increases can be day to day like your Amazon $AMZN delivery addiction. My wife and I spent over $32,000 through the delivery service provider.

Did you ever wonder how much did you spend?

In short, your salary increase should not become a need to spend more money. With the way prices and inflation is set up, you are falling behind. A salary increase of 3% is not greater than inflation of 8%.

It’s OK to slow down and reassess your values. Start being more aware of your spending.

Building wealth is simple. Either increase your income or decrease your expenses.

In order to increase your take-home income, you will have to improve your productivity and your skill set. It’s all about working SMART+ER and not harder. Try not to limit yourself by staying stuck at your current job under the same manager.

How do you apply this money principle?

You need to curate your own environment. Too much news can make you anxious and leave you depressed. Realign yourself with your own goals and narrative. Start by turning away from social media and establishing boundaries. I’m trying a new thing.

No phone before 9 am and none after 9 pm.

Don’t stop there. On a morning run or walk, tune into a great financial podcast. We have a few recommendations. No need to worry about where to start. And finally, try logging at least an hour of reading per day.

Seven Money Principles to Grow Your Net Worth Faster

4. Working on Your Skills and Making a Big Leap

My first job was making $23k before taxes. The second was $32k six months later and after that $64k. In a span of 2 years, I made a seismic jump of over 175%. As of 2023, I’ll be making well over $125k.

This is not a flex

Instead, a reminder that it’s not how you start but how you finish.

Moving jobs may seem risky, but over time you will develop career capital. Most people who take the big leap see at least a 10% boost in their salary.

Moving a city, state or country can grow your network and future opportunities.

The principle of weak ties roughly says “that a lot of opportunities in life come from people who are weak connections.” These acquaintances are likely to be more influential than close friends, particularly in social networks.

Build your skills and your network.

5. Rent Less and Buy A Home

If you want the best way to be poor, just rent. Most people burn money through micro expenditures and renting. Nothing worst than leasing a car that you don’t own or paying someone else’s mortgage.

“You are either paying your own or someone else’s.”

Banks, car dealerships, landlords, and businesses want you to rent forever. It’s their cash flow or passive income stream.

Better double down and own a location before you jump down the deep end of Real Estate Investing. It’s literally not for everyone. Most eventually lose those properties due to being over-leveraged.

6. Extra Income Never Hurts

The next best money principle is to keep making money.

The bear market is here and it’s time to work for your keep. While others are quiet-quitting or just quitting, make sure you keep not one but two streams of income.

Platforms like YouTube can help you meet your community and future income streams directly.

If you have a blog, it helps to push potential clients through revenue funnels. And finally, just make sure you monetize and grow your own brand.

Try not to move in silence anymore. It doesn’t work.

7. Stick to Automatic Millionaire Investing Strategies

My approach to making money and building wealth is easy. Start with your employer plans, add IRAs, and maximize your HSAs.

There is almost no need to overcomplicate how you build wealth. I know there are people winning online and TikTok personalities making $750k per post, but that’s rare. The average millionaire takes at least 40yrs of diligence. They do so with an affordable home that they bought and their 401k. On top of that, they typically invest in an index ETF.

This is the money principle that doesn’t overcomplicate a good thing.

Disclosure: This post is brought to you by the Neighborhood Finance Guy. We highlight financial literacy information, resources, and more on your way to money management goals and personal wealth. Our goal is to help you make S.M.A.R.T.E.R decisions with our money. We do not give investment advice or encourage you to adopt a certain investment strategy. Your personal finance is up to you. If you take action based on one of our recommendations, we don’t earn a dime. We operate independently.

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