How to Grow Your Net Worth from Zero to $100,000 in 3.5 Years

| March 3, 2014 | 26 Comments

I accomplished something pretty significant between late 2009 and early 2013. I grew my net worth from zero to $100,000.

growyournetworth

I don’t remember the exact day or month I crossed from negative to positive net worth territory, but it was sometime in late 2009. I was 25 years old and worth exactly as much as I was as a baby. Over the next three and a half years, I’d build my net worth from zero to six figures. Here’s how to do what I did:

Solidify Your Income

After graduating college in 2007, I joined a small, internet marketing startup for below average pay. I didn’t sweat my starting salary because I saw opportunity (which is the only reason I agreed to work for them). Throughout my first four years with them, I doubled my salary.

To double your income, only work where there is opportunity to do so. Look for examples of others who have done so and listen for clues about opportunities to ramp up the value you provide. You’ll need a significant income (most likely over $50,000/year on average) to create a six figure net worth in just a few years so make sure you’ve got the opportunity to get to that level.

Track Every Dollar You Earn and Spend

Right around the time I crossed into positive net worth territory, I started tracking my finances with Mint.

I’m only going to say this once. Tracking your finances is an ABSOLUTE MUST if you don’t want to be broke your whole life. Here’s how to get started:

  1. Head over to Mint.com and create an account.
  2. Connect all of your financial accounts (checking, savings, money market, credit cards, mortgages, car loans, brokerage, retirement, etc.)
  3. Manually add in the market value of any property you own with a significant worth (houses, cars, land, etc.)
  4. Log in 3-4 times per week for the next 3 months and categorize EVERY SINGLE transaction (rent/mortgage, food, transportation, insurance, entertainment, shopping, travel, etc.)
  5. At the end of 3 months, take a look at your trends, which will show you how much you earned and spent, and get ready to scream.
  6. Stop the bleeding and start actually building wealth.

Tracking your finances is the ONLY way you will build wealth. Take it from me. If you don’t know how much you’re earning and spending every month of every year, you won’t be getting anywhere financially let alone crossing the six figure mark anytime soon.

Get Control of Your Big Three Expense Categories

The big three expense categories where we spend the majority of our money at are:

  1. Housing
  2. Transportation
  3. Food

We need to get and keep spending in these three categories under control.

Housing: If your mortgage payment is “only” $700/month, but your heating and air conditioning bill is over $200 per month, you shouldn’t be bragging. Add up your mortgage/rent payment, your property taxes (if you own), your association fees (if you own a condo), your average monthly maintenance costs (if you own), AND all of your monthly utilities and THAT’S your housing cost total. For example: here are my monthly housing costs:

  • Rent: $745/month
  • Electricity: $40/month
  • Total: $785/month

Transportation: Again, we’re not just looking at your car payment, we’re looking at everything, including gas and maintenance. Looking at the past year, here are my average monthly transportation costs:

  • Gas: $111/month
  • Insurance: $83/month
  • Licensing: $13/month
  • Maintenance: $10/month
  • Washing/Detailing: $2/month
  • Total: $218/month

Food: Once again, when you look at your food expenses, look at all your eating, including fast food, fine dining and even coffee shops/alcoholic drinks. Here are my average monthly food costs for the past year:

  • Groceries: $165/month
  • Alcohol: $71/month (ouch)
  • Eating Out: $21/month (+ an est. $35/month for dates out with my girlfriend)
  • Coffee Shops: $1/month
  • Total: $293/month

As you can see, I keep my big three in control. Make sure you do as well if you want to get ahead.

Eliminate Every Other Unnecessary Expense

If you are serious about saving up a big pile of money, you need to cut costs in more areas than just your big three. When I started saving big time money, I made all kinds of little cuts in many areas. I made cuts on my:

  • Haircuts
  • Shampoo
  • Body Soap
  • Hand Soap
  • Toothpaste
  • Toothbrushes
  • Deodorant
  • Facial Tissues

Most of these things can be downgraded from name brand to generic without even noticing. I cut the equivalent of $20/month from my monthly spending on just the things above by doing just that. In addition, I cut cable TV and other recurring monthly expenses all together.

Stop Borrowing Money (Seriously, Never Do It Again)

When you borrow money, you pay interest. Also, when you borrow money, you buy what you don’t have the money for. Even worse, borrowing money for liabilities costs you money, because what you’re buying is costing you money.

When you buy a shiny new (or slightly used) car, you are buying something that is going down in value. In 2008, I bought a car for $20,000. Today, it’s worth less than $10,000. Even if I would have paid for it in cash, I would have lost the ten grand. But buying it on credit cost me even more, since I paid interest as well.

The main problem with borrowing money is that you’re buying something much more expensive than what you could afford to buy in cash, therefore, you have a bunch of additional risk. It compounds your purchase big time, either positively or negatively. Most of us think we’re going to make it rich from buying our home, but very few of us will come out making money on our homes.

All in all, borrowing money is NOT a winning strategy for building wealth, only for destroying it.

Solidify Your New Habits

After you make your lifestyle cuts and live that way for a few months, it will be on auto-pilot. My spending sits just over $22,000 per year pretty much automatically these days. I don’t force myself to save money, it just happens.

To build your net worth from zero to $100,000, you need to solidify your habits by maintaining them for a few months. After that, it will be automatic, like it is for me. I created freedom in my life by changing my habits and making them permanent.

Remember Your “Why”

Lastly, remember your “why”.  Remember why you want to build wealth in the first place. For me, it was about creating options, freedom and independence in my life. For you, it may be about something similar, but make sure to find what it is and remember it.

When you have big reasons for doing it that are close to your heart, that will motivate you to get there. You can do it, no matter where you are today.

Category: Getting Ahead

Comments (26)

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  1. That is a really nice story of how you got out of debt, and built a 6 figure net worth.

    The one thing missing is what to do about those savings you are so painstakingly accumulating. If you just put them in your bank, you are not really helping yourself. If you prudently invest it however, you will eventually have your money working for you, rather than the other way around.

    Btw how is your entrepreneurship journey going?

    Best Regards,

    Dividend Growth Investor

    • DGI,

      I’m definitely a fan of investing. While I was working at a full-time job, my money was heavily invested in the stock market. Now that I’m self employed, I’m still invested in the stock market but more heavily invested in my own company. To me, that’s the right move to make right now.

      My entrepreneurship is coming as reported a few post ago. Right on track to be cashflowing my life here soon enough. Hope things are going well for you.

  2. moneystepper says:

    Great post and congratulations – that is a pretty tasty looking graph.

    I completely agree with the importance of tracking your wealth. If you make NO other changes today, then tracking your wealth is the most important and this single act (without any conscious effort to change your spending/saving/investing patterns) will have a huge impact on your future wealth.

    • MoneyStepper,

      Yes, the single act (and habit) of tracking your income and expenses can make all the difference from being broke your whole life to having wealth. I believe that’s so simple because it brings logic into the equation and shows you what you’re doing with your money.

      When we see how stupid we are being with our money, we will change and stop it.

      Thanks for stopping by and take care!

  3. Jarrad says:

    I find it so funny that so many people borrow money to buy a car. I’ve never understood why people would do that? It’s like throwing your cash out with the trash. Amazing!
    Your better off living inner city (to be near work, shops and entertainment) and having a bike or living near a bus or train station. Living in the suburbs is too expensive because you need a car to get around.
    And if you live in a place where rent is high (like I do) you simply need to share the rental property with other people, its the only way to maintain your net worth, let alone grow your net worth.
    I’m so jealous of Americans….$745 rent a month to rent my own place would be a dream come true. I only rent a room (within a share house) here in Australia and have to pay $50 more per month, AND THAT’S CHEAP.

    • Jarrad,

      I can understand why they do it because I did it 12 years ago. It’s simple, I wanted the nice car, regardless of if I had the money (and I could get it by using a loan).

      Living close to work it great. Luckily, I lived in the suburbs and right next to work, since my office was in the suburbs. I moved there on purpose though and would have done the same if I worked in the city.

      Sharing your living place is good too, although I didn’t do that either. I was willing to sacrifice by not living in the nicest places, but still living alone. It’s all about making tradeoffs I believe.

      Interesting about the cost of your room. Funny you say that because many people hear of my rent amount and they say, “holy cow”, that’s a lot of money. But you’re right, it could be FAR more expensive. But, I’m from a small town where rent in really cheap.

      Take care,

  4. Cash Rebel says:

    Well said! What a concise description of the real way to amass tons of wealth. I’ve tried to explain this to countless friends over the past few years. Look at your big opportunities first and lock them down, then worry about the little stuff. My goal is to go from $15k to $100k In 3 years, and it’s looking pretty good. I’ll let you know of I was successful of not in December of this year.

  5. Good stuff, Kraig. That’s a pretty great accomplishment, and one I think your readers will appreciate, as it’s accessible. Whether you’re starting at zero, a negative number, or already have a sizable net worth, adding $100k from simple changes is a pretty great result.

    • DBF,

      Thanks. Yes, it is accessible. Like I mentioned, it can be done in just a few years of putting your head down and staying focused.

      I didn’t start at zero either, I had to plow my way out of debt too just to get to even.

      Talk to you soon, my friend.

  6. Sandy says:

    Something that I learned eons ago—

    Double your money by folding it in half and putting it back in your pocket.

    Comfortably living below the poverty level off this wasteful culture.

    • Sandy,

      Nice tip. I do happen to agree. It’s funny how there’s such an opportunity to live on so little while everyone else is not “able” to, which in turn makes it easier for people like us.

      Take care,

  7. Rebecca says:

    Enjoyed reading this post and that’s an awesome story to share. It is disheartening, however, because I am having a hard time just getting to $0 net worth! I have been so “well behaved”, too! Or so I thought… I have NO credit debt, NO student debt. When I was 19 I bought my first house – that was 2007. And then suddenly it all crashed and now I’m -$35,000 net worth because I’m SO underwater. I’m trying to pay down the mortgage by applying extra principal but the market is actually declining in my area! I’ve been sinking faster than I can swim for 6 years :( And I don’t qualify for HARP or HAMP or whatever. I have already refinanced. I have no idea what to do.

    • Rebecca,

      Sorry to hear about what happened with the home you purchased. If you ever want to share your story with my readers, let me know. I may be interested in featuring it, since I want to make people aware of the these possible downfalls of home ownership.

      Also, if you want to chat privately about all this, I’d be happy to do that as well and offer my thoughts. Just send me an email if you’re interested.

      Take care,

  8. Ajaveen says:

    Great post Kraig. Very motivating. I am glad you mentioned not borrowing money. I once borrowed from a finance company for many years.
    Since I have paid them off in May of 2013 they have been calling
    and leaving messages on my phone. I have been consumer debt free since October 2013. I have almost $2,000 saved in my emergency fund.
    My goal is to have $10,000 in my emergency fund by March of 2015.

    Your website is an inspiration to this former shopaholic-consumer debtor- turned saver. Now only if I can cut my cable LOL.

    • Ajaven,

      Thanks for the comment. Yes, I’m a believer in not borrowing money, even though I get a hard time for it once in a while.

      Great job getting rid of your debt! I bet you feel a lot better now that you’re out from under all that.

      Let us know how it goes with attempting to cut cable!

  9. Hey Kraig,

    Really incredible progress! I am just starting myself, I’m the same age as you are, and it would be truly amazing to reach that net worth in 3 and half years!

    However, to be more realistic, I am counting on the compounding power of starting young and expecting to be able to contribute more later in life due to career growth. Let’s see how it goes, I will definitely keep following.

    Congratulations!

    • Dividend Venture,

      Thanks, and welcome. Glad to meet you. Big things can happen when you put your head down and kick it for a while. It sounds like that’s exactly what you’re starting to do. I’m excited to follow along on your journey and let me know if you ever want to chat via Skype or Google Hangouts. Would love to connect.

      Talk to you soon,

  10. What an impressive story.

    When I was paying off my mortgage rapidly, I also tracked every dollar I spent. That was a couple years ago before Mint.com launched its app. Now, it’s even easier. You can just glance at your financial picture on the go. One trick I use: I make myself check my Mint when I feel the urge to make an impulse purchase. Usually I’ll delay the purchase because it gives me an instant reminder of “the why” as you put it.

    • MFM,

      Thanks for stopping by. Yep, I definitely love Mint. It’s been a HUGE part of my financial progress and success.

      Everyone.. take it from Mike, Mint is THE WAY to go for tracking your money. It flat out rocks.

      Take care, Mike.

  11. Kelly S. says:

    I was using mint, but switched to this app called “Checks”, which I like a little better. Mint is the best, but I wanted something simpler. I may return to mint in the future.

    I always thought of my expense categories as being–Savings, Fixed, and Entertainment. With the ideal ratios being 60/30/10. Though Ive gone so far right with my saving, even 10% sounds reckless. lol

    I had 20k in my mind as what I wanted to live on, it makes up just under 40% of my income.

  12. debT debS says:

    Good guide for all young people to follow to get out of debt and work hard to stay out of debt!

    I’m going t share this with my kids. I think hearing it from someone in their own age group will mean more than old mum harping on and on.

    I’m trying to tell them now “do as I say, not as I did”!

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