Do you want to increase your net worth? Well, so did we. Let me tell you how we did it.
One fall night in 2010, my wife Nicole and I were watching the Suze Orman Show. (Yes, I used to DVR it). There was this fun segment where someone would call in and Suze would analyze that person's financial health and give them a grade. It was called How Am I Doing?
One term that we kept seeing over and over again on this segment was “Net Worth”. Since we were personal finance newbies, we had no idea what this meant. Nicole and I were making a combined annual income of $130,000 so we figured our net worth must be HUGE.
After the show was over, we decided to see how rich we really were. There was no doubt in our mind that we’d be better off than most of the jokers that call into the show and get an “F” grade from Suze!
We walked upstairs and started to write down all of our numbers on a big whiteboard. By separating our “assets” (what we owned) and our liabilities (what we owed) into two big columns, we started to discover that we weren’t rich.
We were kinda broke.
Although we were making a solid income together, our liabilities were much higher than our assets.
Here is a snapshot of what our numbers looked like back in 2010 (rounded educated guesstimates based on me losing some of our data along the way):
There’s no way were going to get an “A” grade on Suze’s show with a –$50,000 net worth!
This epiphany moment was just the jolt of reality we needed to start making progress on our finances. Our short-term goal was to increase our net worth and get into positive territory ASAP!
It was time for us to make a change.
The Steps We Took to Increase Our Net Worth
1. Track Your Net Worth
Nicole and I quickly realized that we couldn’t improve our financial situation if we weren’t tracking our net worth. This number was going to be the barometer for our future financial success.
We took all of the numbers off of our whiteboard and inserted them into an excel spreadsheet. From that point on, we updated our asset and liability totals monthly to track our progress. Even just seeing the numbers helped!
(Side Note: Personal Capital wasn’t around back then, but if it was, it would have made the whole net worth tracking process a lot easier. It’s free and it automatically updates your net worth by syncing up your accounts. We use it now and love it.)
** Net Worth Total (September 2010) = -$50,000 **
2. Live on a Monthly Budget
Another monthly habit Nicole and I adopted around this time was living on a budget. We got the idea after reading Dave Ramsey’s The Total Money Makeover. He talked about the importance of living on a zero-based budget and giving every dollar an assignment.
Getting on the same financial page with Nicole before each month began was really important for us as we started our marriage.
Each month, we’d do the following:
- Review our spending, saving and debt balances
- Plan out next month’s budget
- Discuss our financial dreams and goals to ensure we’re headed down a path we’re both excited about
We eventually learned about a budgeting tool called Mint that automated the budgeting process much like Personal Capital did for our net worth tracking. This tool saved us a ton of time and it was free too!
(Side Note: If you’re looking for a budgeting tool specifically for couples, Zeta is an excellent option.)
** Net Worth Total (January 2011) = -$35,000 **
3. Eliminate Your Consumer Debt
After being inspired by Dave Ramsey’s debt crushing ways, we decided that becoming consumer debt-free would be an excellent way to increase our net worth.
For me, I really hated having student loans and wanted them gone as soon as possible. My 6.8% interest rate did not help the process either. (Debt refinancing services like SoFi would have been huge for me back then!)
For Nicole, she loved her 2008 Audi A4 and thought it would be incredible to own it outright with no payments.
Through our monthly Budget Party, we discovered we could eliminate both of these debts before the end of the year. This would require us to essentially live on my income and use Nicole’s to pay off the debt.
The plan worked! We were consumer debt free by September 2011 and we increased our net worth into positive territory to boot.
After making the final payment on Nicole’s car, we took a joy ride in her paid-for Audi A4 on a beautiful fall night in Michigan.
** Net Worth Total (September 2011) = $20,000 **
4. Save 50% of Your Income
At this point in our marriage, we were a month away from having our first child. Our financial standing was looking pretty solid. We increased our income to around $170,000 by the end of 2011. Our little Zoey would be born into a debt-free family and that made us proud.
We liked our current home, but we started thinking about our family growing from 2 to 3 (to eventually 4). Getting into a good school system was very important for us. That being said, we knew that homes in our desired school district were expensive!
Our new goal became saving up as much money as possible for a big down payment on our dream home. Our plan was to save 50% of our income and live on the other 50%.
** Net Worth Total (January 2012) = $45,000 **
5. Increase Your Income
Luckily, 2012 was an outstanding year for us income-wise. We were both working full-time at our jobs and brought in the most money we’ve ever made as a couple together in one year … $280,000!
I had a commission-based sales job and I achieved the company record for most annual revenue brought in on our most important account (it was a small company).
We ended up saving way more than 50% that year. Here are some highlights of what we did with our money:
- Saved over $100,000 cash
- Updated my bachelor pad into a family home
- Bought my first car with cash
- Funded our daughter's 529 Savings Account with $10,000 when she was born
- Traveled to Puerto Rico for a nice getaway over the holidays
** Net Worth Total (February 2013) = $210,000 **
6. Get a 15-Year Mortgage
When we finally bought our dream home, the cash savings we amassed allowed us to put down 45%. This cut our new mortgage principal by a sizable amount immediately.
Our plan was to pay off this mortgage in 5 years!
We went with a 15-year mortgage through LendingTree and got a super-low 3% fixed rate. This helped us to put more toward the principal balance each month and push toward our goal of becoming mortgage-free by 2018.
** Net Worth Total (January 2014) = $359,000 **
7. Be Flexible Because Life Happens
When our second child (Calvin) came into our lives, we decided it was best to have Nicole stay at home and raise our two kids. Since we’d been essentially living on one income for quite a while at this point, it wasn’t that big of a life shocker for us. My income was still very comfortable at around $160,000 that year.
This income change did slow our net worth growth quite a bit, but honestly, those previous few years were unicorns! We’re just happy we saved like we did so that Nicole could spend more time with our kids. It was one of the best decisions we ever made as a family.
** Net Worth Total (January 2015) = $385,000 **
8. Max Your Retirement Savings
In 2016, we decided that maxing out all three of our retirement accounts (401k, Andy's Roth IRA and Nicole's Roth IRA) was a smart move to further increase our net worth. My workplace 401k had been maxed since 2013, but we had not been doing the same for our Roths.
In addition to clobbering our mortgage principal, this tax-advantaged plan helped us break the half-million mark in our net worth journey!
By this time, we were fully into Personal Capital to help us track our progress. It became quite addicting actually.
** Net Worth Total (January 2017) = $547,000 **
9. Pay Off Your Mortgage Early
In November 2017, we paid off our 15-year mortgage in less than 5 years. One year ahead of schedule!
Nicole, Zoey, Calvin and I had an epic mortgage freedom celebration together that we’ll never forget. We wanted our kids to remember this important moment in our lives so they too could be inspired to live without debt in the future.
Without a mortgage, our net worth has been increased steadily. The incredible stock market surge in 2017 definitely helped as well!
** Net Worth Total (February 2018) = $679,000 **
10. Save For First Rental Property
Although 2018 saw an overall drop in the stock market, we weathered the storm and kept up a high savings rate. Most of our extra money went into a savings account to build up enough money to buy our first rental property.
We also did fun things like update our home and go on some epic family vacations.
** Net Worth Total (January 2019) = $764,000 **
11. Create a 30-Hour Work Week Lifestyle
Recently, we decided that buying our first rental property was not something we wanted to do. The responsibility of managing a rental property (even with a property manager) wasn't something Nicole and I were thrilled about. We weighed the pros and cons of real estate investing and decided against it (for now).
Instead, we chose to use our cash as a runway for me to work on my small business full-time (or part-time rather). My goal is to work 30 hours per week so I can spend more time with family, taking care of my health and enjoying more life today.
I was inspired by my wife who recently went back to work and created a 30-hour workweek that she loves. Her commute is short, her workload is reasonable and it’s a nice change of pace for a woman who’s been a stay-at-home Mom for nearly 5 years.
** Net Worth Total (January 2020) = $917,000 **
12. Give Back
After becoming debt-free and paying off our mortgage early, we realized we wanted to give more. There were charities and causes that we felt passionate about and given our financial situation we were ready to be the change we wanted to see in the world.
We increased our charitable giving from 1% of our after-tax income in 2017 to 5% in 2019. With a goal of giving 10% in 2020, we have designed a unique way of giving on our path to financial independence:
- 5% for charitable giving
- 4% for family giving
- 1% for random giving
While it may seem counterproductive on a path to increase your net worth, we now feel that building true wealth involves some sort of giving. There's a lot for us to learn and explore here and we're excited to see where it takes us.
** Net Worth Total (June 2020) = $1,061,000 **
In Conclusion: After Increasing our Net Worth for 10 Years
We’ve come a long way since our -$50,000 net worth in 2010. I’m so proud of the hard work that Nicole and I put in increasing our net worth. Without my wife’s partnership, none of this would have been possible.
We recently crossed over the $1,000,000 net worth mark, my first thought is … it’s just a number. On the surface, it really doesn’t mean anything.
But when you peel back the layers and find out what’s inside, that’s when you discover what our net worth is made of. Our home, our cars, our retirement savings and our emergency savings are all things that bring our family joy. These assets will allow us to live happy, healthy and purposeful lives. They will also allow us to give generously of both our time and our money.
With some hard work and a little luck, our kids will see our example and continue to strengthen this family tree of ours in the future.
Where are you in your net worth journey?
Please let me know in the comments below!