How I achieved positive net worth in 5 years

Five years can seem like an eternity but it can start today. Achieving positive net worth is achievable but you have to put in the work. As always this post may contain affiliate links, if you click and make a purchase I may earn a commission at no extra cost to you. 

I had a mildly viral tweet and Instagram post. You really see the strength of the debt-free and FI/RE communities when something like this happens. I was asked how did I achieve positive net worth with an average annual income of $25K.

However, what is net worth? It is a metric to determine your financial health. It is the values of all of your assets and debts and then the debts are subtracted to determine your net worth. Usually, it applies to business but many individuals do the calculation as well. The equation is Assets – Debts = Net Worth

It is a lifestyle change.

So what did I do, so you can apply these changes to your life?

1. Make a plan and a budget

Ask yourself how you can realistically achieve this. You want to still live and enjoy your life. Allow yourself those treats. For myself. it is traveling. I refused to give that up but I did it differently. I began to save for these trips and budget them out to ensure I do not go over a certain amount.

Read this post to figure out what considerations you need before you create your next budget. This is how I was able to create a successful budget that I am now able to implement in a HCOL (high cost of living) area – Stockholm, Sweden. Currently, I live on the equivalent of $800 USD a month.

2. Increase investment and savings rate

As part of making a plan, it also is determining what makes the cut. The only way to do this is to either increase your income or decrease your expenses. I will not bother discussing cutting coffee out of your budget aka “the latte factor.” Most of us on a lower income cannot even think about buying coffee every day. However, you can go through your last 3 statements and figure out any ‘ghost’ expenses, like forgotten unused subscriptions, small purchases at the gas station, etc. 

Once you have figured out which areas to cut out then you can use that remaining money to invest or save in an HYSA (high yield savings account). As for what to invest I cannot recommend any particular stocks but many in the FI/RE (Financial Independence/Retire Early) community recommend index funds. 

I use M1 finance, which has an easy to use platform that once you choose your stocks or index funds and you deposit money regularly. It will be sent to automatically purchase those shares, so you do not have to manually choose which shares to buy with that money. It is very hands-off. 

Items mentioned in this text

If you are looking for a brokerage to start building your Net Worth you can do it with M1 Finance. We both get $10 when you fund your account.

3. Increase debt repayment rate

As I increased my savings rate, I did the same with my debt repayment. I stopped paying the minimum and enough to cover the interest accrued. Instead, I made sure that it would cover all of the interest and then some. Compounding interest is a b***h if it is working against you.

Click here to read more on the different debt repayment methods. 

4. Marie Kondo your life - Sell the things you no longer use/need.

This is pretty straightforward but it has gotten to the point that I only have one skillet. It is a cast-iron skillet but I use it for everything. I just season it and then wipe it up when I am done with it. Super easy to clean, multipurpose (can be used on the stove or in the oven, or even be a weapon of choice). 

This is part of the minimalist movement but I am more of a believer in selling these items you do not need rather than donating them to a Goodwill. Use this money to pay down your debt or put it towards your investments. Whichever fits you better. 

5. Not buying new clothes/shoes

This can be hard for many but not buying new clothes and shoes regularly will help you save money in the long run. However, you still want to look great. So you can create a budget that allows you to still buy new clothes. I know not everyone can afford to do so but if you can buy good quality clothes and shoes especially when they are on sale it will save you in the long run. For instance, I bought a pair of Doc Martens at an outlet store for 40 quid back in 2013. These shoes normally go for triple that, but they are good quality and I still wear them regularly. Most of my clothes are from when I was an undergrad (2008-2013). I only buy when I need to replace something, which is not often.


6. Eating like a Vegetarian

I may have lost you here but please hear me out. Meat is one of the most expensive parts of your grocery bill. So, if you can focus on eating vegetarian meals, and only buying meat when it is on sale then do it. Personally, my grocery bill is $80 a month (that is cheap in Sweden) because I do not buy meat. I instead buy frozen vegetables because it is cheaper and lasts longer than the fresh. There are many delicious and nutritious meals that you can make that do not involve meat.

7. Add a side hustle

Honestly, I hate this recommendation as time is a valuable commodity. You can earn more money but you cannot earn more time. So, if you have a hobby that you are able to commodify then look into that. Many people who enjoy shopping have applied these skills into creating a reselling career. It only takes a few hours a week to do it and if you are successful it can translate into a full-time career. 

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*Whispers* Personally, it is investing.

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