How to Achieve a High Net Worth

Though an exact dollar amount hasn't been assigned to the term "High Net Worth Individual", a generally accepted ballpark figure is an individual who has over $1 million in liquid (non real estate) assets. Contrary to popular belief, one doesn't need to be born to an affluent family or win the lottery to join the high net worth "club". In fact, there are several factors that most "HNW" individuals have in common. Regardless of age, there are easy steps that everyone can take to guarantee that their net worth grows, even in a down economy.

A simple equation can dictate the difference between having a high net worth or not: earn more than is spent, and invest the difference. While easily said, execution is far more difficult because it requires individuals, and in most cases families, to maintain a reasonably frugal budget and live below their means. Money management should be taken seriously as well, and will require extra time after work or on the weekends. Budgeting and pre-planning are essential for success.

When it comes to investing, depending on how much money is at stake, an individual may choose to invest the money himself or he may rely on a trusted adviser to be his portfolio manager. In difficult economic times, it may be worth a fee to an expert who will invest wisely because the benefit will be recouped later.

Young people have a particularly good chance to ensure that they become high net worth individuals in their later adult years by choosing an occupation that is enjoyable and working hard at their chosen career. Moving up in a company will ensure a higher salary and more cash that can be invested. Not all high net worth individuals are employed by large companies; some are entrepreneurs and own their own businesses and have the flexibility to take part in non-traditional but lucrative business proposals.

Another easy way to ensure wealth growth is make contributions to 401(k) plans as well as Individual Retirement Accounts (IRAs). 401(k) plans are sponsored by companies and oftentimes include a matching bonus that is encouraging and beneficial as wealth will grow more quickly; IRA plans are currently limited to a $5,000 per year contribution for those who are 49 and below and a $6,000 contribution from those who are 50 years and older. As an added bonus, tax code provisions allow for a more lenient taxation of these monies.

http://www.irs.gov/retirement/participant/article/0,,id=188232,00.html

http://www.irs.gov/retirement/article/0,,id=119625,00.html