12 Wealth Building Habits to Grow Your Net Worth in 2024

Wealth building is not a one-time event, but a continuous process that requires discipline, strategy, and patience. Whether you are just starting out or already have some savings and investments, there are always ways to improve your financial situation and grow your net worth.

In this article, we will share 12 wealth building habits that you can adopt in 2024 to achieve your financial goals and secure your future. These habits are based on the principles of spending less than you earn, saving and investing wisely, diversifying your income sources, and planning ahead.

These tips are for individuals who want to build their personal wealth. If you are a founder or entrepreneur, you may also want to check out these wealth management tips for founders.

1. Set a Budget — And Don’t Override It

One of the most basic and essential habits of wealth building is to set a realistic budget and stick to it. A budget helps you track your income and expenses, identify areas where you can save money, and allocate funds for your financial goals.

Effective wealth builders recognize the significance of maintaining a lifestyle where they spend less than they bring in. This is also known as having a positive lifetime wealth ratio, which measures how much wealth you have accumulated relative to your lifetime income.

To set a budget, you need to first calculate your net income, which is your income after taxes and deductions. Then, list all your fixed and variable expenses, such as rent, utilities, food, transportation, entertainment, etc. Subtract your total expenses from your net income to get your monthly surplus or deficit.

If you have a surplus, you can use it to pay off debt, save, or invest. If you have a deficit, you need to find ways to reduce your expenses or increase your income. You can use apps, spreadsheets, or online tools to help you create and manage your budget.

Dedicate yourself to saving a portion of your income regularly and budget in a way that encourages you to live within your means. This will help you avoid overspending, debt, and financial stress.

2. Avoid Lifestyle Creep

Lifestyle creep, also known as lifestyle inflation, is the tendency to increase your spending as your income rises. While it is natural to want to enjoy the fruits of your hard work, lifestyle creep can undermine your wealth building efforts and prevent you from reaching your financial goals.

For example, if you get a raise, you may be tempted to buy a bigger house, a nicer car, or more expensive clothes. However, these purchases will not only increase your expenses, but also your expectations and desires. You may soon find yourself needing more money to maintain your new lifestyle, and end up living paycheck to paycheck.

To avoid lifestyle creep, you need to be mindful of your spending habits and resist the urge to splurge. Put bonuses, unexpected windfalls, and any extra money into savings or investments instead of speeding them to sidestep the trap of lifestyle inflation. Instead of spending your extra money on things that do not add value to your life, put it into savings or investments that will grow your wealth over time.

One way to do this is to automate your savings and investments, so that a percentage of your income is automatically transferred to your retirement accounts, emergency fund, or other investment vehicles. This way, you will not be tempted to spend the money that you do not see.

Another way to avoid lifestyle creep is to set a spending limit for yourself, and stick to it no matter how much you earn. For example, you can decide to spend only 50% of your income on your needs, 30% on your wants, and 20% on your savings and investments. This is known as the 50/30/20 rule, and it can help you balance your spending and saving.

3. Look for Tax Savings

Taxes are one of the biggest expenses that can eat into your income and wealth. However, there are ways to reduce your tax liability and save more money for your future.

One of the best ways to save on taxes is to take advantage of tax-advantaged accounts, such as 401(k)s, IRAs, HSAs, and 529 plans. These accounts allow you to save and invest money for specific purposes, such as retirement, health care, or education, and enjoy tax benefits such as deductions, deferrals, or exemptions.

For example, if you contribute to a traditional 401(k) or IRA, you can deduct your contributions from your taxable income, lowering your tax bill for the year. If you contribute to a Roth 401(k) or IRA, you pay taxes upfront, but your withdrawals in retirement are tax-free. If you contribute to an HSA, you can deduct your contributions, enjoy tax-free growth, and withdraw the money tax-free for qualified medical expenses. If you contribute to a 529 plan, you can enjoy tax-free growth and withdrawals for qualified education expenses.

The amount you can contribute to these accounts varies depending on the type of account, your income, and your age. You can consult a tax advisor or use online calculators to determine how much you can save and invest in these accounts, and how they will affect your taxes.

Another way to save on taxes is to look for tax credits and deductions that you may qualify for, such as the child tax credit, the earned income tax credit, the mortgage interest deduction, the charitable contribution deduction, and the student loan interest deduction. These credits and deductions can reduce your taxable income or your tax liability, depending on the type and amount.

To claim these credits and deductions, you need to keep track of your income and expenses, and file your tax returns accurately and on time. You can use software, apps, or online tools to help you organize your tax documents and prepare your tax returns. You can also hire a professional tax preparer or accountant to help you with your taxes, especially if you have a complex tax situation.

4. Pay Yourself Like a Business

One of the most powerful habits of wealth building is to pay yourself like a business. This means that you treat your personal finances like a business, and allocate a portion of your income to yourself before you pay anyone else.

This habit is also known as “paying yourself first” or “PYF”. The idea is that you prioritize saving and investing for your future, and live on what is left after you pay yourself. This way, you will not be tempted to spend all your money on your bills, debts, and other expenses, and end up with nothing to show for it.

To pay yourself like a business, you need to first determine how much you want to pay yourself, and for what purpose. For example, you may want to pay yourself 10% of your income for your retirement, 5% for your emergency fund, and 5% for your other financial goals. You can adjust these percentages according to your income, expenses, and goals.

Then, you need to set up a system that automatically transfers the money from your checking account to your savings or investment accounts, as soon as you receive your income. This way, you will not have to rely on your willpower or memory to pay yourself. You can use apps, online tools, or direct deposits to automate your payments.

By paying yourself like a business, you will be able to build your wealth consistently and effortlessly, and achieve financial security and freedom.

5. Use Debt to Your Advantage

Debt is often seen as a negative thing that can ruin your finances and prevent you from building wealth. However, debt can also be a useful tool that can help you leverage your money and achieve your financial goals.

The key is to understand the difference between good debt and bad debt, and use debt wisely and responsibly.

Good debt is debt that has a positive return on investment, meaning that it helps you increase your income, wealth, or net worth in the long run. For example, taking out a student loan to finance your education can be considered good debt, if the degree you obtain will help you land a higher-paying job and advance your career. Similarly, taking out a mortgage to buy a house can be considered good debt, if the house appreciates in value over time and provides you with a place to live.

Bad debt is debt that has a negative return on investment, meaning that it costs you more money than it brings you, and does not add any value to your life. For example, using a credit card to buy things that you do not need or cannot afford can be considered bad debt, if you end up paying high interest rates and fees, and accumulating more debt than you can repay. Similarly, taking out a payday loan or a car title loan can be considered bad debt, if they charge you exorbitant interest rates and fees, and put you at risk of losing your car or other assets.

To use debt to your advantage, you need to:

Only borrow what you can afford to repay, and avoid taking on more debt than you can handle
Compare different loan options and choose the ones with the lowest interest rates and fees
Pay off your debt as soon as possible, and prioritize paying off the high-interest debt first
Avoid missing or making late payments, as they can hurt your credit score and incur penalties
Use your debt for productive purposes, such as investing in your education, business, or assets, and not for frivolous or unnecessary spending

By following these tips, you can use debt as a tool to leverage your money and grow your wealth, rather than as a burden that drags you down.

6. Go “Cash Broke” and Invest

One of the common mistakes that people make when it comes to wealth building is to let their money sit idle in their bank accounts, earning little or no interest. While having some cash on hand is important for emergencies and daily expenses, having too much cash can be detrimental to your financial growth.

To achieve true wealth, it is crucial that your money is always actively working for you in the form of investments. Investments are assets that generate income, appreciate in value, or both, over time. Some examples of investments are stocks, bonds, mutual funds, exchange-traded funds (ETFs), real estate, etc.

By investing your money, you can benefit from the power of compounding, which is the process of earning interest on your interest. Compounding can help you multiply your money exponentially over time, and achieve your financial goals faster.

For example, suppose you have $10,000 in your savings account, earning 1% interest per year. After 25 years, you will have $12,834. However, if you invest the same amount in the stock market, assuming an average annual return of 8%, you will have $68,485 after 25 years. That is more than five times the amount you would have in your savings account.

Similarly, adding $3,600 to a traditional savings account annually for 25 years would result in approximately $90,000. But at an assumed 8% average growth rate in the stock market, investing $3,600 annually for 25 years could earn you approximately $284,236 (more than 3 times you deposit in your savings account).

To go “cash broke” and invest, you need to:

Determine your risk tolerance, time horizon, and investment objectives, and choose the appropriate asset allocation and diversification strategy for your portfolio
Research and analyze different investment options, and select the ones that match your criteria and expectations
Invest regularly and consistently, and take advantage of dollar-cost averaging, which is the practice of buying a fixed amount of an investment at regular intervals, regardless of the price fluctuations
Reinvest your dividends and interest, and avoid withdrawing your money unless necessary
Review and rebalance your portfolio periodically, and adjust your strategy according to your changing needs and market conditions

By going “cash broke” and investing, you can make your money work harder for you, and build your wealth faster and easier.

7. Find Diverse Income Streams

Another habit of wealth building is to find diverse income streams, and not rely on a single source of income. Having multiple income streams can help you increase your cash flow, reduce your dependence on your primary income, and protect you from financial shocks and uncertainties.

One way to find diverse income streams is to broaden your investment portfolio by incorporating alternative assets and passive income streams, such as rental properties, peer-to-peer lending, crowdfunding, royalties, etc. These assets can provide you with regular income without requiring much work or involvement from you.

Another way to find diverse income streams is to monetize your skills, knowledge, or hobbies, and create active income streams, such as selling your products or services, freelancing, consulting, teaching, writing, etc. These income streams can allow you to leverage your talents and passions, and earn extra money on the side or even full-time.

To find diverse income streams, you need to:

Identify your strengths, interests, and goals, and brainstorm ideas for potential income streams that suit your personality and lifestyle
Research and evaluate the market demand, profitability, and feasibility of your ideas, and select the ones that have the most potential and value
Plan and execute your ideas, and test and validate your assumptions and results
Promote and market your income streams, and build your audience and customer base
Optimize and scale your income streams, and automate or outsource the tasks that you can delegate or eliminate

By finding diverse income streams, you can increase your earning potential, diversify your income sources, and achieve financial stability and freedom.

8. Set Realistic Financial Goals

Wealth building is not a random or haphazard process, but a deliberate and intentional one. To build wealth effectively, you need to have a clear vision of what you want to achieve, and how you plan to achieve it.

One of the best ways to create this vision is to set realistic financial goals for yourself. Financial goals are specific, measurable, attainable, relevant, and time-bound (SMART) objectives that you want to accomplish with your money. Some examples of financial goals are paying off debt, saving for retirement, buying a house, starting a business, etc.

Setting realistic financial goals can help you:

Focus your attention and efforts on what matters most to you
Motivate and inspire you to take action and make progress
Track and measure your performance and results
Celebrate your achievements and reward yourself
Adjust your strategy and tactics as needed

To set realistic financial goals, you need to:

Turn your financial aspirations into written goals, and break them down into smaller and more manageable sub-goals
Begin by delineating both short-term and long-term objectives. Short-term goals may encompass settling credit card debt, building an emergency fund, saving for a vacation, etc. Long-term goals could involve saving for retirement, buying a house, starting a business, etc. Establish realistic timelines and specific amounts for these goals.
Keep your written goals within easy view to stay motivated, and review them regularly to monitor your progress and make any necessary changes
Use apps, online tools, or spreadsheets to help you plan and track your goals, and visualize your results
Seek support and guidance from your family, friends, mentors, or financial advisors, and learn from their experiences and advice

By setting realistic financial goals, you can create a roadmap for your wealth building journey, and achieve your desired outcomes faster and easier.

9. Play the Long Game

Wealth building is not a sprint, but a marathon. It requires time and patience, and a long-term perspective. Many people make the mistake of chasing quick and easy money, and end up losing more than they gain. They fall prey to scams, frauds, or schemes that promise high returns with low risks, but deliver nothing but losses and regrets.

To build wealth successfully, you need to play the long game, and ignore the short-term noise and distractions. You need to focus on the big picture, and not let the market fluctuations, media hype, or emotional impulses sway you from your course. You need to understand that wealth building is a gradual and consistent process, and not a one-time event or a lottery ticket.

To play the long game, you need to:

Adopt a growth mindset, and believe that you can improve your skills, knowledge, and abilities over time
Learn from your mistakes and failures, and use them as opportunities to grow and improve
Seek feedback and advice from experts and mentors, and apply their insights and lessons to your own situation
Invest in yourself and your education, and keep learning and updating your skills and knowledge
Invest in quality assets and businesses, and hold them for the long term, rather than trading or speculating on them
Diversify your portfolio and income streams, and reduce your exposure to risk and volatility
Reinvest your profits and income, and take advantage of compounding and reinvestment
Be flexible and adaptable, and adjust your strategy and tactics according to the changing market conditions and your personal circumstances

By playing the long game, you can build your wealth steadily and sustainably, and achieve lasting financial success and freedom.

10. Don’t Buy Every Shiny New Thing

One of the biggest obstacles to wealth building is consumerism, or the tendency to buy things that you do not need or cannot afford, just because they are new, trendy, or appealing. Consumerism can lead to overspending, debt, clutter, and waste, and prevent you from saving and investing your money for your future.

To build wealth, you need to resist consumerism, and adopt a minimalist and frugal lifestyle. You need to be mindful of your spending habits, and only buy things that add value to your life, and not things that take away from it. You need to differentiate between your needs and wants, and prioritize your needs over your wants.

One of the things that you should avoid buying is every shiny new thing that comes out, such as the latest gadgets, devices, or fashion items. These things are often overpriced, overhyped, and underwhelming, and they lose their value and appeal as soon as the next shiny new thing comes out. They do not contribute to your wealth or happiness, but only to your expenses and debt.

One of the reasons why people buy every shiny new thing is because they suffer from the fear of missing out (FOMO), or the anxiety that they are missing out on something better, more exciting, or more rewarding than what they have. FOMO can make people feel dissatisfied with their current situation, and compel them to chase after the next best thing, even if it is not in their best interest.

To overcome FOMO, you need to:

Practice gratitude, and appreciate what you have, rather than what you don’t have
Focus on your goals, and prioritize your needs and wants, rather than what others have or do
Avoid comparison, and stop measuring your success and happiness by other people’s standards
Limit your exposure to social media, advertising, and other sources of influence that can trigger your FOMO
Seek fulfillment, and pursue activities and experiences that make you happy and satisfied, rather than things that make you look good or impress others

By avoiding buying every shiny new thing, you can save more money, reduce your clutter, and increase your happiness.

11. Build an Emergency Fund

An emergency fund is a stash of money that you set aside for unexpected events or expenses, such as losing your job, getting sick or injured, repairing your car or home, etc. An emergency fund can help you cover these costs without having to dip into your savings, investments, or debt.

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Having an emergency fund is essential for wealth building, as it can protect you from financial shocks and uncertainties, and prevent you from derailing your financial plans and goals. An emergency fund can also give you peace of mind, and reduce your stress and anxiety.

To build an emergency fund, you need to:

Determine how much money you need to save for your emergency fund, based on your income, expenses, and risk factors. A common rule of thumb is to save enough to cover three to six months of your living expenses, but you may need more or less depending on your situation.
Choose a safe and accessible place to keep your emergency fund, such as a high-yield savings account, a money market account, or a short-term CD. Avoid keeping your emergency fund in risky or illiquid assets, such as stocks, bonds, or real estate.
Save money for your emergency fund regularly and consistently, and treat it as a non-negotiable expense in your budget. You can automate your savings, or use apps, online tools, or challenges to help you save more money.
Use your emergency fund only for true emergencies, and not for regular or discretionary expenses. If you use your emergency fund, replenish it as soon as possible.

Maintaining a robust cash reserve for unforeseen circumstances is crucial. Having quick access to an emergency fund when unexpected expenses arise can prevent resorting to a high-interest credit card balance or taking out personal loans. However, an emergency fund is not the same as a rainy day fund, which is a smaller amount of money that you set aside for minor or predictable expenses, such as car maintenance, home repairs, or medical bills. You can learn more about the difference between an emergency fund and a rainy day fund here.

Whether you choose to save six months or a year’s worth of cash, tailoring your emergency fund to fit your cash flow is essential.

12. Track and Review Finances Regularly with Kubera

One of the most important habits of wealth building is to track and review your finances regularly, and not just once a year or when you have a problem. Tracking and reviewing your finances can help you:

Monitor your savings and investments, and measure your performance and returns
Evaluate your progress and results, and compare them with your goals and expectations
Model future scenarios and plan better with respect to your finances
Identify your strengths and weaknesses, and discover areas where you can improve, diversify, or optimize
Make informed and timely decisions, and adjust your strategy and tactics as needed

To track and review your finances regularly, you need to have the right tools and systems that can help you collect, organize, analyze, and present your financial data and information. You can use apps, online tools, spreadsheets, or software to help you with your financial tracking and review.

One of the best tools that you can use to track and review your finances is Kubera, an all-in-one net worth management platform. Kubera can help you:

Sync all of your accounts, investments, and assets, and get a single, big-picture view of your net worth
Track your performance over time, and measure your return on investments, investment values, and your overall wealth
Make smarter decisions about where and how to allocate your funds, diversify and optimize your portfolio and income streams
Model real-life scenarios to see how it affects your net worth in the future with built in financial planning
Secure and protect your financial data and documents, and share it with your trusted contacts or beneficiaries

Wealth building is not a mystery or a miracle, but a skill and a habit that anyone can learn and practice. And Kubera is the ultimate tool for wealth builders, as it can help you manage your wealth effectively and efficiently, and achieve your financial goals faster and easier. You can sign up for a trial today and see for yourself how Kubera can help you build your wealth in 2024 and beyond.

Remember, wealth building is not a destination, but a journey, and you are the driver of your own journey. So, start today, and enjoy the ride.