The Ten Keys To Personal Wealth

The average net worth of a household in the 1 percent is $8.4 million according to a report cited in the New York Times. That is 69 times more wealth than that of the average American household. It’s important to note the difference between net worth (another way to describe wealth) and income. In order to make it into the top 1 percent of household income, you’ll need to earn about $450,000 according to data cited in Investopedia.

There is a difference between having a good income and having wealth, this article will highlight a few important points to keep in mind when trying to build personal wealth.

1. Avoid Credit Card Debt

The average American owes over $16,000 in credit card debt. That’s about 30% of average annual household income. The first step to building wealth is avoiding debt.

For readers who are already in debt, it’s best to first pay off bad debt before setting money aside to invest. That’s because credit card companies usually charge high-interest rates that cause existing debt to compound and get out of control.

If you pay $100 per month toward $16,000 in credit card debt, assuming an 18.5% interest rate, it will take 27 months to pay off. Along the way, you will have had to pay nearly $21,000 in interest before ever paying off the $16,000 principle.

2. Save At Least 20% of Your Income

A good rule for managing your money is the 50/30/20 rule. This piece of financial wisdom says that 20% of your income should go into your savings, 30% should go to discretionary spending and 50% should go to necessities like rent, your mortgage, and car payments.

Of course, if you are able to save more than 20% of your income, then you definitely should. If you are able to save an extra $100 each month, in 30 years, assuming an 8% interest rate, you will have made over $140,000.

3. Make Smart Investments

Saving is half the battle, making smart investments that provide a good return is the other half. On average, the S&P 500 (a collection of the 500 largest public companies on the New York Stock Exchange) returns 7% annually.
Learning to make smart investments will help you to avoid bad years in the stock market, and to identify stocks that will outperform the market. For example, this year the S&P has returned over 10%. At the same time, Amazon is up over 36% and Netflix is up over 52%. A smart investor could theoretically have made a 5x better return than the average by choosing smart investments.

4. Monitor Spending Habits

Overspending can make it nearly impossible to build wealth. Fortunately, there are a few different tricks available to help readers avoid bad spending habits.

One option is to use a free budgeting tool like Mint or Personal Capital that make it easy for users to set a budget and stick to it. These tools also help users understand how changes to spending habits can impact future goals.
Another option is to simply monitor spending through your bank account and to download spending history into Excel at the end of each month. From there, Excel savvy budgeters can identify areas for improvement.

5. Track Credit History

There are three major credit bureaus that lenders use when trying to know if they should provide a loan. In some states, businesses are allowed to run a credit check when vetting job candidates as well. Having a good credit score is important to be able to build long lasting wealth. The only way to achieve this is tomonitor your credit history and to repair your credit when needed, according to Credit Repair.

Platforms like Credit Wise and Credit Karma make it easy for anyone to automatically receive updates about changes to credit score for free. Some banks like Bank of America and JPMorgan Chase also provide customers with a free credit score tool.

6. Save for College with a 529

College can be one of the most expensive purchases any household will make. To prepare for this purchase, and to preserve wealth, consider opening a 529 college savings account. This plan allows households to save for college tax-free. It is the government's way of incentivizing families to plan ahead for their children’s future.

Considering that the average college student graduates with over $37,000 in debt, a 529 plan can be a great way of helping your kids achieve financial freedom, faster.

7. Prepare for Retirement Early

Believe it or not, but one out of 3 people in the United States have no retirement savings plan. The same report found that of those who have saved for retirement, 56% have saved less than $10,000. In short, Americans aren’t doing a great job of saving for their future. In order to build personal wealth, it is important to create a retirement savings plan early.

Many businesses offer employees access to 401K plans, some of which will match any money you save via the 401K up to a set limit. For those who do not have access to a 401K plan, opening a Roth IRA is another good option. A Roth IRA allows you to save up to $5,500 per year tax-free if you are under 50 and up to $6,500 if you are over 50.

8. Have an Open Conversation about Money with your Partner

According to a report cited by CNBC, money is the leading cause of stress in most relationships. Amazingly, 35% of all survey participants who experienced stress in their relationship said that money was the main cause of most disagreements. In order to successfully build wealth, you and your partner will need to have an open and honest conversation about your financial priorities.

9. Buy a Used Car

A car is one of the biggest financial purchases you will make other than buying a house or paying for college. In order to preserve wealth consider purchasing a used car in good condition. CarFax reports that on average a car will lose 60% of its value within the first five years. Owning a new car means you are owning an expense, not an asset. Leasing a car isn’t much better.

Consider this, if you own a car at the bottom of the cost depreciation curve, you can still sell it for something close to what you paid for it. When you own a new car, you will have to sell it for a sizable loss. If you lease a car, you won’t be able to sell it at all since the dealer is the one who owns the car in the first place.

10. Learn how to Negotiate a Raise

Millennials and women are less likely to negotiate a salary increase than previous generations according to research cited in the Washington Post. Failing to ask for a raise can have negative financial consequences in the long run. Alternatively, successfully negotiating a raise can mean that you are able to earn considerably more money throughout your career.


Building personal wealth requires self-discipline and knowledge. To get started be sure to avoid credit card debt, save your money wisely and learn how to make smart investments. Preparing for retirement and saving money in a 529 plan can help you preserve wealth in the long run. Opting to buy used and negotiating a pay raise can help build wealth as well.


Jason Friedman has 13+ years of safety professional and also in that time managed five figure monthly PPC account and SEO for safety consulting firm. His knowledge comes from real world hands on results.

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