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Do you want to be rich? Silly question, right? Many people would answer yes, but it takes work to increase your wealth — unless you win the lottery.
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If you want to get on the path to riches, make these 18 New Year’s resolutions to start building your wealth in 2022.
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If you want to be rich, it seems obvious that you should know where you stand financially. People often sense that they aren’t in a good financial place but don’t want to be aware of how potentially bad their situation is, said Alicia Butera, a certified financial planner for Planning Within Reach in San Diego.
“Being aware of your financial situation and keeping it in mind all the time is the key to improving your finances and growing your wealth,” Butera said. “Your resolution should be to understand what you have, know where you want to be in the future and decide how you plan to get there.”
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This resolution goes hand-in-hand with being more aware of your financial situation. To increase your wealth, you have to know where your money is going. But many people often don’t, said Therese R. Nicklas, president of The Wealth Coach for Women in Rockland, Massachusetts.
Nicklas recommends documenting all of your daily spending by using a budgeting app or a budget template you can download. Once you identify your money leaks, you can trim those expenses. That might not mean eliminating them and altering your lifestyle, she said.
See if you can reduce your bills by getting better rates from your service providers or shopping around for better deals. That can give you more room in your budget to save.
“You will be surprised how subtle adjustments can add up,” she said.
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To grow your money, vow to treat your personal finances like a business. “Businesses must adhere to this set of rules, otherwise they would cease to exist,” said Alex Koury, a certified financial planner with Values Quest in Phoenix. “The same principle should apply to people’s personal finances as well. And if we were to all review our numbers more diligently, we would all be making smarter money decisions.”
To treat your finances like a business, you must develop a budget, review your income and expenses on a monthly basis, create a net worth statement and make sure you’re profitable, he said. “That doesn’t necessarily mean putting your money into the stock market; look to invest in yourself through education or start a side business.”
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Rather than throw away your money on interest payments, you can make it work for you by stashing it in an account or investments that earn interest.
“Not relying on credit cards, lines of credit and borrowing to live your lifestyle is a proven way to become wealthy,” Nicklas said.
If you add up what you’re spending in interest, you’ll be shocked, Nicklas said. This might help motivate you to create a plan to pay off your debt as fast as possible. Then you’ll free up more cash to invest and grow your wealth.
An easy way to get rich is to keep more of your money. “Being frugal will enable you to increase the amount of money you can save,” said Tom Corley, author of “Rich Habits: The Daily Success Habits of Wealthy Individuals.” “The more you have in savings, the more options you have to make money.”
To stop wasting money, be aware of how you’re spending it, Corley said. Examine your bank and credit card statements to see how much of your money is going toward things you need versus things you want. Cut back on unnecessary purchases and look for ways to spend the least possible on things you need by shopping around for the lowest price, Corley said.
Take frugality a step further by slashing your biggest expense to free up more money for saving and investing. “When most people make financial resolutions, they think small,” said J.D. Roth, founder of the website Get Rich Slowly. “If you truly want to make a difference, you have to think big.”
“There is nothing better you can do to improve your finances than cut your housing costs,” Roth said. Housing is the biggest expenditure for U.S. consumers — with one-third of total household spending going toward this cost, on average, according to the Bureau of Labor Statistics. You can score big savings if you’re willing to move, Roth said. This might mean moving to a smaller house, to a different neighborhood or to another city where the cost of living is lower.
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A mentor can help you get on the path toward riches by offering you advice, opportunities to advance your career or guidance for launching or improving your own business.
“Mentors can teach you success habits, change your beliefs, how to think, how to achieve goals, specific processes that lead to success and shortcuts to success,” Corley said.
And they’re everywhere — you just have to seek them out, he said. A mentor can be someone in a higher position at work, a person you meet through volunteering, a professor from the school you attended or a connection made through a professional organization.
“Make a list of successful people you’d like to learn from and just ask them out for breakfast, lunch or to have a beer,” Corley said.
If you want to be rich, you likely will need to commit to saving more.
“The higher the percentage, the faster you will become wealthy,” Corley said. Among the self-made millionaires he studied for his “Rich Habits” book, people who saved 10% or more of their income from the time they started working became rich in their 60s.
“For those in my study who saved 20% or more, they became rich in their mid-40s,” he added. “The more you are able to save at an early age, the more wealth you’ll accumulate and the sooner you’ll be financially independent.”
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If your goal is to increase your wealth to retire early or to simply get rich quicker, you’ll need to set aside as much as possible. “I like to urge people to save half,” Roth said.
More people are able to do this than they realize. For example, if you’re married and both you and your spouse work, consider living on one income and saving the other.
“Pick a crazy target and aim for it every month,” Roth said. “At first, you’ll miss it, and that’s OK. Start tweaking your spending until you get closer and closer to the bullseye.”
Chances are you’re missing a great opportunity to grow your money by getting a tax refund each year. That’s right — if you get a big check each spring, that means you’re letting Uncle Sam hang onto your money interest-free during the year.
“People are happy when they get their own money back at zero interest,” said Leon LaBrecque, CEO of LJPR Financial Advisors in Troy, Michigan. “If they had stashed the income tax refund in their 401(k), they’d have kept the money, saved the taxes and hopefully made some market gains.” You can fill out a W-4 form to adjust your tax withholding and get more money in your paycheck.
If you want to become rich, you have to be willing to take some risk. “Studies have shown that the affluent more frequently take above-average — but not senseless — investment risk, generally report understanding risk, and have an understanding of the risk and return characteristics of investments,” said Ray Benton, a certified financial planner with Lincoln Financial Advisors in Denver.
That doesn’t mean you should put all of your money in the stock market. But if you avoid risk by sticking only to safe investments such as money market accounts, your money won’t grow much because of the low rates on these accounts. Vow to get over your fear of investing by learning to understand and manage risk.
To get rich, vow to leverage your job better financially. “This means making sure you are paid what you are worth,” said Bridget Grimes, founder and president of WealthChoice, a financial planning firm in San Diego focused on women. That includes both salary and benefits.
To find out the average pay for people in your position, check websites such as Payscale, Salary.com or Glassdoor. If you think your pay or benefits fall short, make the case for a raise. If you can’t get ahead financially at your current job, “have a plan to get another position that will provide these financial benefits,” Grimes said.
Consider getting a side hustle or second job. There are plenty of part-time gigs to make more money.
“If you’re like most people, you’ve got one stream of income — your job,” Corley said. “And if you’re like most people, you are either poor or stuck in the middle class. If you want to break out of poverty or the middle class, you need to begin creating multiple streams of income.”
Use your extra cash to quickly get out of debt, invest in assets such as stocks or set aside in savings. You can use it to start your own business or buy a rental property for more streams of income.
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Passion is a key ingredient in getting rich, Corley said. “It is the catalyst that transforms ordinary individuals into self-made millionaires,” he said. “When you pursue something you are truly passionate about, you are somehow able to find the time to devote to it.”
So resolve to figure out what you’re passionate about this year and spend time cultivating that passion. It might mean reading books on the subject, taking courses to improve skills related to your passion or creating a business plan and pursuing funding.
“You must take action and invest in yourself today in order to create the future life you desire,” Corley said.
You can increase your wealth by increasing your bandwidth. “Bandwidth is about what you do,” LaBrecque said. “For everything we do, we have opted to not do something else.”
For example, when you pay bills, it takes time and money to pay for the stamps to send them. However, if you set up automatic bill pay, you’ll free up time and a small amount of money, LaBrecque said. Vow to find ways to reduce the time you spend on trivial tasks so you’ll have more time to learn new skills or hacks to increase your income, he said.
Commit to checking your insurance policies to make sure they’re up to date and that you have ample coverage. “Nothing puts a damper on growing wealth than a big, uninsured loss,” said Mark Smith, founder of Vision Wealth Planning in Glen Allen, Virginia.
Also, make sure you’re not paying more than you have to for insurance. “Regularly shopping auto, home or umbrella coverage can result in real savings that can be added to investments,” Smith said.
It’s one thing to vow to take steps to become rich. It’s another to stick to your resolutions. You can increase your chances of success by letting others know about your goals.
“One of the key factors to improving your finances is to have accountability,” said Serina Shyu, a support advisor with Jon Baker Financial Group. “If you can’t hold yourself accountable, then share your goal with a trusted person.”
Most likely you know someone who also is trying to get ahead financially and also needs an accountability partner. “Once you share your financial goals, you can help motivate each other to stay on track,” Shyu said.
The rich often have help growing their wealth. So don’t assume that asking for assistance is a sign of weakness. Instead, resolve to reach out to those who can help you reach your goals.
“Most people who grow financially rich do so by soliciting the help of others,” Smith said. “Mark Zuckerburg didn’t build Facebook all by himself.”
Whether that means finding investors to help you get a business off the ground or hiring a financial planner to help you take control of your money, getting help can help you reach your goals faster.
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