According to The Federal Reserve, the wealth of Americans grew $1.2 trillion dollars during the last quarter. The bulk of the rise in assets is attributable to the stock market with stocks increasing $939 billion and mutual fund shares gaining $378 billion. The biggest depressant was the real estate sector which declined nearly $700 million dollars.
In the face of all of this positive economic news, do you feel any richer? Have the balances on your 401(k), Roth IRA, and stock portfolio increased? Have you increased the balances in your bank account and reduced the balances on your credit card accounts?
If so, then this is the perfect time to outline your plans for 2011. Here is a checklist of 5 things that you can do to increase your net worth and start building wealth.
1. Don’t create any new debt.
If you want to get out of debt in 2011, then you have to attack your old debts. In order to effectively do this, make sure that you don’t take on any new debt. Make a pledge that you will not take on any new debt in 2011. Avoid enticing offers for credit. It’s only 1 year. You can easily go 365 days or 8,760 hours or 525,600 minutes without adding to your debt burden.
2. Create a get out of debt plan.
I know that you made a get out of debt plan last year and didn’t stick to it. That’s okay. This is a new year. Use any extra income that you are receiving to pay down outstanding debts. It may not seem like a lot but an extra $25/month can shave years off of your credit card debt.
3. Contribute more to your retirement plan.
Did the market crash of 2008 scare you off from adding to your 401(k)? The economy is getting better and things are improving. It’s time to start contributing to your retirement plan again. Bump your normal contribution percentage up at least 1%. Your goal is to max out your contribution amount so that you can receive the maximum contribution match and maximum tax deduction. If you have an IRA, the same rules apply minus the employer match.
4. Give yourself a raise!
Unless you are a federal employee (sorry!), you will probably be receiving a raise over the next few months. Take this raise and save it. Use your cost of living increase to bolster your emergency savings account. This money should be placed in a high yield savings account so that you have a cushion in case any financial hardship occurs.
5. Diversify your income stream.
The time of working for one company for 30 or 40 years has passed. As the past few years have shown, companies will lay off employees at the first sign of a crisis. In order to add stability to your finances, look to diversify your income outside of your primary place of employment. You can always start your own side business, become a freelancer, or start your own business.