← BiggerPockets Money Podcast
BiggerPockets Money Podcast
10 Ways to Massively Increase Your Net Worth in One Year (Median Salary)
00:34:03
Loading summary
Transcript52 lines
- [00:00]
A
Massively increasing your net worth in one year sounds unrealistic, but for many people pursuing financial independence, it can happen much faster than you expect, especially earlier in your wealth building journey. Today we are breaking down the practical yet totally doable strategies that can dramatically accelerate the growth of your net worth and help you fast track your financial independence. Hello, hello, hello, and welcome to the Bigger Pockets Money Pie podcast. My name is Mindy Jensen, and with me, as always, is my has doubled his net Worth in one year. Co host, Scott Trench.
- [00:39]
B
100% Mindy. Very excited about this conversation today. Mindy, have you ever doubled your net worth in a year?
- [00:44]
A
So Carl and I started tracking our net worth when it was about five or six hundred thousand dollars. We didn't really keep track of it before then, so I'm sure it had doubled at one point before that, but after that it has never doubled in one year. We've had significant ups, a couple of significant down, but never doubled once we started tracking it. Scott, do you remember if your net worth ever doubled in one year?
- [01:11]
B
Sure. My net worth doubled almost certainly in the very early stages of the journey when I went from, you know, very close to zero net worth to my first 20, $30,000. It may have doubled again in certain years as real estate took off with high leverage. And then when Josh Dworkin decided to sell BiggerPockets back in 2018, he named me the president of BiggerPockets. And as part of leading the company, we when the company sold, I was paid enough that it effectively doubled my net worth at the time of the sale.
- [01:39]
A
That's awesome. I mean, you were not president in name only. You were doing so much work on that, I'm sure on the transition process, but just in general, running bigger pockets, that was well deserved, Scott. Congratulations.
- [01:52]
B
Well deserved. I don't know, Lucky. Right place, right time. Maybe other people have something like that happening in their lives there. I'm surprised you have not doubled your net worth in a year though. Across your entire journey, has there ever been a particularly good year that stood out where your net worth jumped by an enormous amount?
- [02:07]
A
I have a list of our net worth on January 1st every year from 2013 to 2024. 2013 was 586,000. 2014 was 869,000. So a nice bump, but not doubling. The next year was 987, so just like 130,000. But that was the year my husband was also making 130,000. So our net worth went up by the amount that he was bringing in. Working 40 hours a week. The next was 1,057,000. The next year we were up 200,000 up 300,000 up. Looks like 29,000 the year between 18 and 19. So when your net worth doubled, I increased my net worth by $29,000.
- [02:53]
B
Woohoo. I don't think that it's very likely you're going to find a way to double your net worth. We don't have any way to do that. We're not going to pretend to. If you already have a several hundred thousand or multimillion dollar net worth, it may be very reasonable for you to double your net worth if you're starting very close to zero or have less than $100,000 and make a reasonable income. And that's not going to be because of some mysterious investment return. It's going to be because of the actions that you drive. May be aided with a little help from volatile markets. So should we get into it and let's talk about the framework for how to massively increase your net worth in one year?
- [03:25]
A
Yes, but before we do that, Scott, let's talk about what exactly are we discussing when we say net worth?
- [03:31]
B
Net worth is everything you own minus everything you owe. So you can increase your net worth by accumulating cash, by accumulating ass, by having the assets go up in value, or by reducing your debt. All of those are viable ways to move your net worth forward.
- [03:49]
A
Okay, that is a great framework. I think if you've got a net worth of $20,000 and you have $10,000 in debt, once you pay off that $10,000, your net worth jumps by that same amount.
- [04:00]
B
Mindy, how do you increase the amount of cash you accumulate in a year?
- [04:03]
A
Well, your income minus your expenses is the cash flow or the amount that you can save every month.
- [04:10]
B
And then the wildcard is taxes.
- [04:11]
A
The wild card is taxes. If you can reduce your tax owed, that's more money that's not going out of your pocket to the government, but instead your pocket to your pocket.
- [04:21]
B
That's right. So that's all this is. We're going to look through these items here. There's no mystery. And just look for the best leverage points that are accessible to people who are early on in their financial journey and say, what are the most effective actions you can take in the next year to massively increase your net worth? And that's what we got today. Sound good?
- [04:37]
A
That sounds great. Scott, what is the first thing that you should do when you are looking to increase your net worth?
- [04:43]
B
All right, number one thing Is cutting fixed expenses. Fixed expenses are what kills the American budget. Fixed expenses are things like housing, cars, subscriptions, insurance, utilities. That insurance includes medical insurance, for example. If you can get those expenses to be lower on an ongoing basis, you save money every single month automatically, which can all feed into more automated investing or accumulation. With housing, that can mean making the big decisions to buy something that is way below your means to live in a smaller apartment, to get roommates early in the journey, sacrifice some square footage. What do you actually need? If you are spending at the limits that your income allows, you're probably spending too much on housing and it's going to be very hard to save money on a long term basis. Same thing with a car. The lower we can keep our transportation expenses primarily by, you know, the best is avoiding a car entirely and building a life that does not require a car for a few years. But if it does require a car, to buy a paid off used economy car if you can, or finance it lightly and pay it off quickly if you must finance it. Subscriptions is a disciplined activity. Set every week, insurance is, or every month to make sure that you do not rack those up and do not, they do not continue unless you're actually using them. And insurance is, I think, a worldview. And what I recommend for insurance is that if you can and you have enough cash and some buffer in your life, you have a high savings rate. Push those deductibles up on the insurance because that can greatly reduce the premiums that you pay every month. You will pay more when you do need to use insurance. If your plan is to build strong savings habits or you already have a strong emergency fund, you can use that. That's an investment that allows you to absorb the infrequent usage of insurance that may come up over time. That's the last step. And then there are other items you can look to, things like utilities, making sure that you're not using power unnecessarily. But if you can get those things locked in, it makes everything else so much easier downstream to accumulate money. Those variable expenses are really hard to control, although we'll talk about those next.
- [06:36]
A
Yeah, I was going to say I would commit to reducing your variable expenses too. After you get your fixed expenses locked down. Your variable expenses are, you know, groceries, restaurants, having fun, clothing, you know, the rest of your life stuff. And you don't really need to buy new clothes all the time. You don't need the latest phone every time it comes out. You can shop the sales and make nutritious Meals with whole healthy foods instead of shopping, you know, oh, I really have a craving for Doritos today. I'm going to go buy a bag of Doritos. There's lots of ways to reduce your variable expenses. One way is just pick one of your variable expenses and commit to reducing it by a nominal amount. Commit to reducing it by 5% this month or 10% this month and then see how that was. Constantly keep track of what's going on in your life. I mean if you're going to significantly reduce your net worth, this is going to take some work. And one of the things that you want to make sure is that you're not reducing your life enjoyment in the all out pursuit of financial independence where you have a kind of terrible existence while you're getting too far. It's going to take you a while to get to fi. You should enjoy the journey but see what it is that you can reduce that you don't even notice.
- [07:53]
B
One of the reasons I like to start with fixed expenses first is because it's a little demoralizing to not buy $5 coffee at Starbucks to when you're spending 24003000 bucks a month on rent. But if you've made the intentional decision to move to a place that's much cheaper, that's well within your means, then maybe that's going to actually spur you to do a little bit better job on the, on the discretionary side as well. And then when it comes to discretionary spending, you know, this is like any habit in life. If you make something easier, it becomes easier to execute as a habit. And if you make it harder, it becomes harder for you to do a bad habit. And so I would encourage you to put a little bit of mild friction between yourself and every one of the transactions of the type that built up or rack up on your monthly budget. So if, if Amazon shopping is a problem, you can cut the prime subscription, that's a drastic one. Or if you want to use Amazon from time to time, but you want to cut back, maybe delete your credit card information from Amazon and re add it every time you want to buy something. So those are ways to potentially do this. And I've, you know, I recently went through and deleted all my credit card data from my browsing history and boy is it a pain in the rear. But it also puts a little bit more friction between myself and some of those discretionary expenses that I don't need to, to put in place there. So those are ideas to get you started. But I Also would argue that this is where I think people critique, you know, frugal, you know, personal finance nerds for being too hardcore. Is when you start not going out with friends and getting drinks on Thursday night or whatever with. With your buddies. That's life, right? That's, I think, what life's all about. That's the memory, that's the relationship piece of this. The other things we just cut here may not impact that or hopefully don't, or have a very limited impact on that. And that's why I think they're the best way to drop expenses.
- [09:30]
A
I will agree with you, Scott, but I'm also going to push back and say that I have a lot of parties at my house where it's more like a potluck style. People come over, they bring a dish, we sit around, we drink great beer, we have great conversations, but we're not out with friends at a bar or a restaurant. Honestly, it started because I wanted to have a much longer conversation than just sitting at a restaurant having dinner. And then I feel guilty, like, oh, I'm taking up this table at this waitress's station. I need to go. I want to be able to have a nice, long conversation with my friends. So we started just bringing people to our house, inviting people to our house so that we could have, you know, the conversations that we wanted to have, not, like, crammed into a tight timeline. So you're still getting the social aspect of it, but you're not. It also happens to be cheaper because everybody's bringing a dish instead of ordering, you know, restaurant food.
- [10:22]
B
Yep. Love it. The reason we started with expenses, by the way, is because every single dollar you don't spend is an after tax dollar that you accumulate that's extremely powerful. And dollar for dollar, much more powerful than earning an additional dollar of income, which we'll talk about next. Right? You can increase your savings rate by increasing your income or reducing expenses. There's a version of financial success where you've done everything right and still feel like you're figuring it out alone. The peers who could actually help you aren't easy to find. And most communities built for that stage aren't really built for that stage. Lee Rowan had heard about long angle from entrepreneurs he respected. He says this about long angle. What long angle has offered me is a level of depth and engagement that I didn't expect. There were no stupid questions. I've been able to expand my learning, expand my strategies, and learn how to raise my family, run my business, and invest better. Long angle is a vetted community of 8,000 plus entrepreneurs, executives and investors across 45 countries. Comparing notes on the decisions that matter across borders and decades of experience. Membership is free for those who qualify. Apply@longangle.com money that's longangle.com money many people who earn under $75,000 a year or $150,000 for a household find financial planning overwhelming and way too expensive for them to justify. Third decade a 501 has set out to resolve that problem. They offer a free 8 week instructor led financial education program, again fully free, funded through grants and philanthropy. You walk out with an actual personalized financial plan. You get paired with a trained volunteer mentor, one of nearly 300 from across the financial industry and they stay with you for two years, not two weeks. Two years. You finish the program and third decade will put $250 into a Roth IRA for you. It's built for people earning under $75,000 individually or under $150,000 as a household. It's available nationally in English and Spanish. The average participant their net worth by nearly $54,000. Go to thirddecade.org that's the number3rd decade.org to learn more study and Play Come together on a Windows 11 PC and for a limited time, college students get the best of both worlds. Get the unreal college deal everything you need to study and play with select Windows 11 PCs. Eligible students get a year of Microsoft 365 Premium and a year of Xbox game Pass ultimate with a custom color Xbox wireless controller. Learn more@windows.com studentoffer while supplies last ends June 30th terms at aka mscollegepc.
- [13:01]
A
Okay Scott, let's move on to the next lever.
- [13:03]
B
The next best way to increase your savings rate is to follow a basic investment order of operations, right? If you take your 401k match and they match 5% of your salary at your job, that's 5% increase to your savings rate, right? And it's not going to be taxed, at least not this year. If you contribute $10,000 to your 401k in this next year by automating your contributions, every paycheck, that's $10,000 that you're saving. And it's maybe another two to $3,000, maybe more, depending on what income tax bracket that you're in and your marginal federal and state tax bracket, that's a really powerful way to increase your savings rate. If you contribute to an HSA on top of that, that further increases your savings rate. So building a Tax advantaged order of operations can be a really powerful way to increase your savings rate effectively in any given year, and one that we'd recommend you start with as an initial hypothesis might look like taking your employer 401k match, maxing your HSA if you have an HSA compatible health care plan. Maxing your 401k, then contributing to a Roth, then contributing to an after tax brokerage account. There are other intermediary steps that we have if you have an employee stock purchase plan, but we've talked about that at length on other episodes. The Bigger Pockets Money podcast Scott I
- [14:14]
A
could not agree more. That's a great thing to have in your mind because then you're committing to following it instead of just, oh, I think I wanted to put some money in my 401k right now. Oh, I think I haven't put anything in the Roth IRA for a while. I'm going to do that. It can get a little jumbled when you're not purposely following a step by step order.
- [14:30]
B
Perfect. What's another step that we can take? What's the fourth step here?
- [14:33]
A
Scott it's my favorite B word. The budget. You need to build and maintain a budget that you review every month. You're reviewing your transactions every month. You just want to know where your money's going and you want to be the boss of where your money's going. So before I had a budget, my money went wherever it went. I would go to the store, I would buy whatever I was going to buy with not really much thought to what I was buying and what I was going to do with it. Swipe the credit card and then come home. And then all of a sudden Carl and I are like, where is all of our money going? We started tracking our spending first and then, okay, now I know where it's going when I'm not paying attention. I think I can cut those. So you first have to track your spending and then you maintain a budget. You create a budget based on where you want your dollars to go and you just keep an eye on it so that you know that you're sticking to it. Because it's really easy for just a dollar to go. Just $20, just $100. And all of a sudden your budget is nowhere to be seen. Scott When I first started, I was just doing this right on a piece of paper on the countertop, right when I came in from the garage, which is where I would come into the house every time I have moved up and gotten with the technological times. And now I spending all of everything in Monarch. I have attached all of my credit cards, all of my bank accounts, all of my investment accounts to my Monarch account. So I can pop on monarch.com and take a look at my entire financial situation. But also I can see at a glance what's going on with my budget. Oh, you know what, it's about the middle of the month. I'm about in the middle of how much I thought I was going to be spending. I'm on track or, hey, I'm way over. Let me see what's going on. It is such an easy thing to do. I don't have to enter all, all of my expenses anymore. Monarch does it for me. If you have not yet signed up for Monarch, it is 50% off your first year for 49.99 if you use the code pockets when you're signing up.
- [16:32]
B
Yeah. So here's how it works for me. It just categorizes every expense into these various buckets we've created for our house and auto populates them every single month. So super powerful, super easy. I can click on any category and see exactly what we've spent. And you know, mine's a little different than maybe many people's because we don't have a mortgage or car payments. Those did not hit this month on the insurance, for example, does not hit for the car or the home this month. So very fairly late month for us in the spending front. But this is a very powerful way to track your expenses and drill down into any category. Reclassify the few that the AI gets incorrectly. But super powerful way to do it. And then we review this, my wife and I, every week we just review the this month's spending compared to the same time last month through that point in the month and see how we're doing relative to our goals. So very, very powerful system here. And it starts with reviewing every single transaction, which Monarch makes super easy.
- [17:19]
A
Super easy. Yeah, I'm not going to show mine because I'm building a house right now and my home improvement budget is such a big part of it that everything else just looks teeny tiny. But when I have regular expenses, Monarch is fabulous for just popping in and seeing exactly where I'm at in the month.
- [17:34]
B
And by the way, so, for example, these expenses categories, right? I just showed you, like, childcare is a big one for me. What are ways to defray that expense? Well, one is a dependent care fsa. So that's something I looked into setting up for myself and my family. Right. And it's you know, and so there's a whole bunch of these little things you can do even for the categories that seem fixed at first. And no, that doesn't change the expense, but it does move some of it pre tax, which is still real cash savings for me. Okay, let's talk about the next lever here. What is the next lever?
- [18:01]
A
The next lever is automating your saving and investing. So you don't even see it. What I'm talking about here is diverting the amount of money. Let's say you're going to aim for a 30% savings rate, talk to the HR department and have 30% of your income sent to a completely different bank account. You don't even see that it doesn't hit your regular bank account. And then you can take that 30% and put it right into your investments, right into your savings account. Wherever you're going to put your savings, you will take that immediately, put it someplace else. Then you don't even have this as an option. Having that barrier can sometimes be the difference between saving the amount that you want to save and not saving. You don't want to spend and then save what's left over. You want to save first and then spend what's left over.
- [18:50]
B
All right, that brings us to level six, which is actually investing the cash that we accumulate in something that we believe is going to grow over the long term. That's the key phrase here. Long term, what do we think is actually going to build our wealth? If we're in the accumulation stage of our financial journey, which is what we're talking about today, what do we think is actually going to grow? In answer to this, that many people share in the Boglehead community, for example, is a broad based market cap weighted index fund with very low fees. That's a very popular answer to this question. Other answers to this question. Our portfolio is like with factor tilts. So I'm going to invest in stock market market broad based mutual funds and I'm going. Or in index funds. And then I'm also going to have an allocation of my portfolio in factor tilts like small cap value or large cap value, those types of things. Real estate is an answer that has worked for many people. There are many right answers to this question. The wrong answer is to not invest and to not take on some amount of risk in exchange for a reasonable shot at return over the next few decades. And that's got to be done. And there's got to be an intellectual decision that you can live with.
- [19:51]
A
Behind that decision, another Wrong answer, Scott, is to invest in because you heard somebody else say something about it. Instead of doing your own research, instead of looking into what it actually means to be investing in that thing. The first thing that comes to mind is the meme stocks from COVID Times where other people heard they were going to invest in these, these stocks and there was this big run up and then a giant collapse. That's not what we want you to be investing in. We want you to be investing in the stock market through index funds. If you don't have a real reason to be investing in individual stocks or take a tiny bit of your portfolio and invest the individual stocks that you have done research on real estate. If you don't want to invest in real estate, then don't invest in real estate. There's lots of stuff I don't want to invest in, so I just don't. I choose what I want to invest in and I invest consistently.
- [20:39]
B
Love it. Yes, I think that that's right. And as a side note, we would love to talk to somebody who really believed in NFTs, for example, and then invested in it and lost. And what, what was the intellectual case? Does anybody have a story from that? Because there's all sorts of things that people genuinely believe in and have really good reasons to to. That's a particularly spectacular collapse. But I think it'd be really interesting to understand the mindset at the time and how people were feeling and how that, how that seems. Looking back, I think that's where we do a lot of really good learning in the space.
- [21:07]
A
It would be a respectful conversation. We just want to know what you were thinking.
- [21:13]
B
Absolutely. All right, now let's take a step back. So far we've talked about cutting expenses and then having a framework for investing our accumulated proceeds. We've avoided talking about income and we generally defer income discussions until later in the conversation because we assume for many of you that you are already optimized on that front or believe you're optimized on the income front. And I think that that's true for a lot of typical American workers is they already have among the highest paying job that's compatible with their desired lifestyle at this point in time. It's harder for them to make incremental moves there. But once we've exhausted cutting fixed expenses, putting in place spending controls, doing basic budgeting, investing according to a tax advantaged order of operations, having an investment philosophy about how we're going to invest, and putting in place the best practices like reviewing and budgeting Then it is time to begin thinking about how to ramp income. And the first and most important thing you can do is just go out and research what your market compensation is. I think it's shocking how many people don't really know the answer to that or it's really moving pretty far out of date. And that answer may be unpleasant. It may be that you're, it'll be hard for you to get a job paying as much as you can at work right now. It may be that, that you can move laterally and it wouldn't make that much of a difference. Or it may be that you could earn a lot more if you were to move jobs. Either way, that's really powerful information for you and I think that should be a clear next step. What are jobs you could realistically get within the next 90 to 180 days in your field?
- [22:46]
A
Absolutely, Scott. I think a lot of people don't realize the retention budget is much lower than the new acquisition budget, the new hire budget. So sometimes, sometimes hopping around in jobs can be great. But yeah, like you said, we're in a kind of weird situation right now with the rise of AI and the reduction in workforce for a lot of computer jobs. Maybe now is a great time to stay put. But again, having that information is key.
- [23:12]
B
I was pretty pleased with the results from the biggerpockets money community on this question, by the way. I'll just quickly show off some data here. People seem to, or many of them seem to do this, but I think, I think the qu, you know, I put a poll I out how important is your current employer to your financial position currently? If you lost your job, what would happen in the next few months? And I have to click one of these to see the answers. But about, only about 12% said that they could earn easily earn more and about 28%, so 40% total would either earn the same or more if their employer cut their job. And fully 60% of folks said that they would either earn less or have a significantly worse quality of life if their employer cut their job. So that's important information. I think that's, that's powerful information to stare down and have a realistic view on. And I'm not surprised by that. Right. Many people take the highest paying job available. And I think that's one of the benefits of pursuing financial independence is you may not have to do that to change the quality of your life.
- [24:05]
A
Yeah. And that dictates how you act at work, how you perform at work.
- [24:09]
B
Absolutely. The further you get along financially, the more, you realize how rare it is to find people who are both at your level and asking the right questions. Dan and his son Adam noticed something unique about Long Angle. The people here all seem to be curious and interested in others. That's hard to find in people who are successful. I started for the financial angle, but the non financial pieces, whether it's relationships, trips, family, wellness, that's brought me a lot of value. Long Angle is a vetted community of 8,000 or more entrepreneurs, executives and investors who came for the financial conversations and stayed for everything else. Membership is free. Free for those who qualify. Apply@longangle.com money that's longangle.com money third decade is a non profit built specifically for the people most financial advice ignores. If you're earning less than $75,000 a year or your household is under $150,000 a year, a traditional financial advisor may not even take your call. Third Decade was built for exactly that gap. As an 513C nonprofit, they offer eight weeks of real financial education, budgeting, debt, investing and retirement. Then they provide you with a personalized plan. When you finish, a trained mentor will work with you for over two years and if you complete the program, a $250 deposit will be made into your Roth IRA upon completion. It's free, it's funded via grants and philanthropy, it's nationally available and it's offered in English and Spanish. Over 70% of the participants are willing to women and nearly 1800 alumni have graduated. If that's you or someone you know, send them to third decade.org that's the number three third decade.org make every get together Chill this Memorial Day. Get up to an extra thousand dollars off select top brand appliances like LG Plus. Get free delivery at the Home Depot Tackle pool towels and camp laundry with a large capacity washer and hook Roast in style with the fridge serving craft ice, mini craft ice, cubed ice and crushed ice. Shop Appliance Savings now through June 3rd at the Home Depot offer valid May 14th through June 3rd US only. Free delivery on appliance purchases of $998 or more. See Store Online for details. So Mindy, how do you actually then go about increasing your income or rectifying that power dynamic?
- [26:26]
A
You are going to want to have a conversation with your supervisor and ask them for realistic career opportunities available to you do at your current job in the next couple of years. Ask them for feedback about how you're doing your job. Ask them for things that you could do better. This is the time to have a really honest conversation with your boss. You also want to give them a heads up that you're going to have this conversation. You don't just want to walk into their office and plop down and be like, hey, I need to have a super serious conversation with you right now. You want to give them a heads up that you want to talk about this. Bring some ideas. Is, hey, I would like to move up to a supervisory role that would increase my compensation. What are some things that I can be doing? I. I think I can be doing 1, 2, 3. Taking on more work, you know, staying a little bit later and liaising with other departments or whatever it is your company does. I don't work there. I don't know. You want them to give you not only some ideas, but written feedback for how you can maximize your next increase when it's time for raises and bonuses. I just wrote an article that went out in the newsletter on the day that we're recording this. It's called, do you want more raises, better job opportunities and actual job security? Do these things. It's filled with tips like solve problems before anyone else even notices them. Become the person who actually follows through. Hey, Scott, have you ever worked with somebody and you're like, hey, can you do this thing? And they're like, totally. And then they never do it. I'm pretty sure I've said that to you and done exactly that in our working relationship. Don't be that person. Be the person who does what they say they're going to do and do it early. If you can build systems instead of just working harder. Know everything that's happening and connect the dots for other people. There are people who go to work, they stay in their little silo, they do their job, and then they go home. Those aren't the people that are at the top of the I want to save their job list. When it comes to a reduction in workplace force. Those are the people that you're like, oh, yeah, Bob still works here. I didn't even remember him.
- [28:28]
B
I think that that's all great and I think there's a lot of ways to move forward in your career, but I would think the action that I think you can take in the next week or two is to set a meeting. Don't surprise or whatever or, you know, shock your boss with anything like a demand for a raise, but set a meeting with your boss for a few weeks from now. Say, hey, in the next two weeks, can I set a meeting with you? And I'd like to Discuss what I can do do to get a promotion in the next one to two years or this neck, take the next step in my career in the next one to two years. Right. And, and that phrase, one to two years is really important because if you go in hot asking for a raise and you don't have leverage, that could backfire on you. Right? And especially in a market like today is depending on what industry you're in. But if you say the next one to two years I want to get ahead, what can I do? They might have things they need done. They can start, you know, connecting the dots in their brain and give those to you as opportunities that can move you forward. And if you give them a year or two to, and you do it this summer and their annual budget cycle is coming up, maybe your raise or promotion will be in that budget for next year when you accomplish those things because your manager is thinking about it. So it's really important to do that. And this is a little bit of a misnomer because for today's episode, because this is not something that will impact your net worth this year, but it is a really powerful step to take a year or two out to give your manager and your company time to actually fund your raise. And your bonus through their system comes super powerful. And your manager will hopefully tell you what you need to be doing or give you other feedback or other clarity in that conversation, even if it's not what you want to hear that gives you other powerful information.
- [29:59]
A
And over the course of the next couple of years, this gives you an opportunity to fill your praise folder. This is a concept we've talked about before on the show. Your email inbox should have a subfolder called praise. And anytime anybody says thank you to you for anything job related that gets saved in the praise folder. I want you to go through your email right now and see, like, just search thank you and see if anybody says thank you for doing this thing. You, you really did such a great job. Search on a bunch of different keywords and put them all in the praise folder. So when you go to ask for that raise, when you go to have that meeting in one or two years, you've got a nice big stack of things. Print them out too. Don't just forward them to your manager. Nice big stack of things that you can show your boss, hey, look, I'm great, great. And everybody thinks so. Maybe don't use those exact words.
- [30:47]
B
Your boss, your manager may want to give you a raise, right? They may want to. They've got to get that approved by their manager, who's got to get approved by the CFO or the CEO or the board right in the annual budget. So work with that process, help your manager, help you by having that conversation, working with them, as they say, well, I want to give you what you want, but there's a couple of things that I also, I really need done that maybe we can mush those together as part of this path to a promotion. Great. Now you do that. You keep the praise for the progress across that. You submit it in one package to your manager. They can now move that up the chain through their voice, you know, by taking that into their recommendation for the budget increases for next year. But these are all things that you got to think about or, you know, start thinking about a year or two in advance if you really want to move these things forward. And your boss has to know what you want very clearly so that they can, they can begin helping you move towards. If your boss doesn't want to help you, then you, they don't want to help you, maybe at the wrong job.
- [31:40]
A
And that comes from the CEO, the former CEO of BiggerPockets. He has what, eight years of CEO experience? Scott.
- [31:46]
B
And many people had really awesome career progression through BiggerPockets and some, some did not over those years. And I think that, that the folks who did expressed that ambition, took on the opportunities and had clear paths. We called them development plans. Clearly separate from a performance improvement plan, a development plan that would put people on the path, path to that next, that next job promotion. So anyways, let's move on to the next lever here. So these are, those are the two most powerful ones, I think, for your main job. What's another way you can drive actively earned income up?
- [32:16]
A
You want to make serious side bets to your income. You've got your regular income, your, your steady job. But what about a side hustle? What could you add outside of your regular working hours to generate more income? What about a small business idea that you've been kicking around in your head? Start to that, read the Lean Startup by Eric Reese. You don't want to start a business idea that costs you a lot of money to get started. A nominal amount of money. Try it out, see what happens. Because if you can spend a little bit of money and learn that it's a great or terrible idea before you spend a lot, that's the best house hack. Get a roommate. If that is at all an option for you.
- [32:57]
B
This can literally be anything in there. And the reason why this is shrugged off or gets the eye roll is because. Because if you make a side bet like you say, I'm going to start a side hustle, there's a very good chance it will fail. So don't commit a lot of money to it. Driving side bets, some kind of activity that can make money on top of your day job is really important if you earn somewhere around the median income. It's kind of foolish and silly if you earn a very high or elite income, in my opinion. So remember, let's take that distinction here. When I was 23, making $48,000 a year, this was the way to get ahead financially. Right. When I was CEO of Bigger Pockets, having side bets didn't make any sense. Right. And would be a pretty confusing or ridiculous position for me to take. So that's, that's really important to think about when we're applying this. We're applying this to folks who are early in the journey, probably in the median, the middle, maybe pushing against upper middle class income here. And for those folks, it can be a really powerful way to build wealth. And the issue is, is you're going to fail a bunch. Who cares? I tried tutoring, I tried driving for Uber, I tried a winter gloves for rental business, I had a Trenches tees business in there. These things all failed. But their learnings, they were cheap. Very little capital, very little financial risk was taken with any of these until things started hitting like a house hack, right? Which is a very major way to build wealth. And so my encouragement is to make these bets realize that there could be a high failure rate on them, but that there's a really good justification for the energy expenditure on these types of side bets in the early days of building wealth and that only a few need to work out over the course of years for it to make a huge difference to your financial position and really drive things forward. And I think this is really underrated way to build wealth. The aggregation of marginal gains or the probability across any one bet is low, but across many dozens made over five years, that's a really powerful wealth building thing that you'll find common among many people who actually go on to reach significant levels of wealth.
- [34:51]
A
Scott, I would love to hear from our audience now. Have you significantly increased your net worth in one year? We would love to hear your story. I would love to share that. Email mindy biggerpocketsmoney.com or scottiggerpocketsmoney.com so we can chat with you and see exactly how you did it. All right, Scott, this was a lot of fun. I appreciate all of your insights as always. Coming up on Tuesday, Tuesday we have Mrs. Dow Jones on the show to talk about how to increase your income and fast track your fire. All right, Scott, should we get out of here?
- [35:23]
B
Let's do it.
- [35:23]
A
That wraps up this episode of the Bigger Pockets money podcast. He is Scott Trench. I am Mindy Jensen saying Catch a matcha.
- [35:30]
B
There's a certain set of challenges that come after the financial ones are mostly solved. Questions about what comes next. How to think about the life you're building around your wealth, not just the wealth itself. Most people find that they don't have anyone to talk to about that part. James Keefe spent 20 years in pharmaceuticals building toward that stage. When he found Long Angle's community, something specific resonated. Here's what he said. It's a community of primarily first generation wealth builders. We all feel like we've gone through some sort of rite of passage. You lend trust a little sooner with that. It's clearly a group of people that also care about you as a person. Long Angle is a vetted community of 8,000 plus entrepreneurs, executives and investors, mostly self made, all navigating the same complexity on both sides of the financial equation. Membership is free for those who qualify. Apply@longlongangle.com money that's longangle.com money third decade is a 501c3 nonprofit doing something I wish existed for a lot more people. If you earn less than $75,000 a year or your household earns less than $150,000 a year, third decade will give you for free an eight week financial education program, a personalized financial plan, and a trained mentor for two years. And if you finish the program, $250 deposited into your Roth IRA. That's not a marketing pitch. That's the actual program. It's funded entirely through grants and philanthropy. Nearly 1,800 people have graduated the program and the average net worth change is $53,962. It's offered nationally in English and Spanish. Two national awards in the last two years. If you've ever wished there was real financial guidance built for normal English incomes, this is it. Thirddecade.org 3rddecade.org.