This recession can make it difficult to keep your head afloat, much less grow wealth. That being said, others are doing it and you can too. Find out how this person increased his net worth using these easy strategies!
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According to a recent Federal Reserve report, median household net worth fell an astonishing 39% between 2007 and 2010, and real (after inflation) incomes dropped, too. It’s a devastating combination that has lead to large swaths of people running out of the maneuvering room needed just to keep their heads above water.
In dollars-and-cents terms, the Fed report calculates that the average family is worth about $77,000. To put that in perspective, that’s roughly the same place we were back in 1992.
If you’re looking to recover — or at least keep from slipping even further behind — here are the simple steps we followed that you can use, too:
1. Cut back on expenses: We knocked several hundred dollars a month off our base living expenses by doing things like dialing back on cable and phone service, adjusting our thermostat, and switching to bulk sizes and store brands. We also curtailed eating out, and our vacations became driving trips to see and stay with out-of-town family. I even taught myself basic plumbing and carpentry skills to tackle the little projects around the house — including money-saving projects like caulking door and window leaks.
There was no single, major expense that we got rid of — but trimming a lot of little things gave us a much-needed cash flow boost that enabled us to aggressively pay down our debts.
2. Pay down debt: During those three years, we knocked down a little more than $17,000 of our debt. That may not seem like much for three years’ worth of effort. But our financial needs also changed significantly during that window of time when we were blessed with our third child.
We were smack dab in the middle of the recession, our income was losing ground to inflation, we had another mouth to feed — and we needed a vehicle that could hold three car seats so we could cart our family around.
So we bought ourselves a minivan, a brand new Honda Odyssey.
Sounds crazy, right? But the only reason we were able to both buy that van and continue to pay down debt over that time was by dealing in cold, hard cash.
3. Save for emergencies and expected purchases, and pay cash when possible: You’re probably wondering where we got the cash. We knew we’d need another vehicle at some point. We had a few months’ living expenses socked away in an emergency fund, so we used a common trick to save money to pay cash for the car: We made a monthly car payment to ourselves.
After my wife’s previous car was paid off, we kept making the car payment — but to our own savings account rather than to the bank. A few years of socking away that money got us more than halfway to what we needed to buy the van. We did have to temporarily pull some cash from our emergency fund to make it an all-cash deal.
That $17,000 in debt we paid down basically ignores money we spent on the van — and the money we “borrowed” from ourselves and paid back to our emergency fund. Our debt level actually dropped during the worst of the recession, in spite of that major purchase.
Paying down debt and saving for life’s expenses certainly kept us from sliding backward during the worst of the recession, but what also helped us make forward progress was continuing to invest.
Get the entire article at Daily Finance!
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