Three Ways to Build your Net Worth

Three Ways to Grow your Net Worth

Net worth is numero uno in becoming financially independent. There are three ways to build net worth over time. There should be some combination of at least two if not all three, that would work for each individual. This is not to say that you cannot develop a financial plan solely based on one of these, but you will be able to get there much faster if you work on at least two of all three areas. So lets jump right into it.

1) Earning a High Income

Earning a high income is the easiest path to start building wealth. It is certainly the path that most of you are familiar with.This is also the most natural way to start when you are young and it helps you start building up your financial nest egg. But the question is, can you get rich by earning a paycheck. Contrary to conventional wisdom, that plain, old, boring 9-5 (or is it 9 to 9?) can make you rich. The question is how rich. While you might never be able to be in the top 1% just with salary alone, if you are aggressive in your savings rate, you can accumulate a decent amount of wealth. If you earn a high income to begin with, it gives you a good start to save more and stash away a part of your income to grow your net worth.  To increase your income earning potential, go to college to get a professional degree like Engineering, Medicine, Accounting, Finance (why do I mention these degrees? I will talk about these in later posts) or other well-paying ones. If you are already working, ask for a raise, get a promotion or, if you have to, go back to school to upgrade your skills.


1) Easy to start earning

2) Easy to grow income by getting more skills, education, promotion etc

3) No stress of managing your own business


1) Less Flexibility

2) Not challenging for entrepreneurial types

3) Does not scale. Solely depending on you going and working everyday

4) 100% of your income depends on 1 job

5) Limited earning potential as your salary can only go up so much

This is how I started and slowly grew to earning a five-figure salary. However, at some point you will maximize your earning potential and the additional effort will not result in proportional rewards. Some people will reach there sooner than later but even if you are not at that level yet, it’s not a bad idea to start thinking about diverting your earning power.

2) Start a Business

It’s not surprising that over about 50% of all millionaires are self-employed or own a business. Starting a business is a great way to start building an income stream that does not depend on your job. It creates additional income streams that can help you achieve financial independence faster and be less reliant on your day job sooner. The passive income can supplement your day-job income and eventually replace it completely. Then your time is freed up to think about other initiatives to grow your passive income even further. Owning your own business has so many other benefits as well. Not only can you control your income, you are can avail numerous tax advantages, build new relationships, find synergies with other businesses. I can go on. Starting a side hustle is a great way to build passive income without foregoing the earned income and over time having the passive income match or surpass the earned income.


1) You control your own destiny and earning potential

2) Can be built at your own pace

3) Supercharged learning when working on your own business

4) New opportunities


1) Hard to set up

2) Initial investment (time and money)

3) Huge initial effort until things are set up

I have started several businesses over the last 10 years and these businesses have generated additional income streams ranging anywhere from $500 to $1000 per week. But more than the money, I have learned so much along the way. Every project I worked on has given me skills that I have used in the next business venture.

3) Invest

Having enough money to invest and living off of the return is the ultimate financial independence. Usually this is the hardest one to crack because you need money to start investing. But once you have accumulated enough through earned income or through side hustles, you can start investing this money and it grows without any involvement from you. There are different investment vehicles you can do that involve varied amounts of risks and rewards but as long as you can diversify and get 3-4% return, you are golden. 3-4% is safe withdrawal rate which means you can withdraw that money and would never have to worry about running out money. While there are multiple ways to slice and dice this category and you could invest in anything from stocks, bonds, REITs, precious metals such as gold, silver, commodities etc but more about that later. I like to keep most of my assets in low-cost index funds.


1) True financial independence

2) Passive income. Set it and forget it

2) Provides financial independence

3) Not dependent on you working


1) Need capital to start investing

2) Longer periods to see returns

3) Highly dependent on economic cycles

As for me, I have done all three over the last 10 years to varying degree. However, I still earn most of my income through salary and some through investments thanks to some aggressive savings and investments I have done over the years. My income through side businesses is very limited right now and has gone up and down over the years depending on what I am working on. Over the next year, my personal goal is to grow my passive income and make it more predictable so I can save more and reach financial independence faster.

How do you thinking about building net worth? Which strategies are you using to build your net worth? Are you considering to diversify your income? Please feel free to share your thoughts in comments.

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