From Five Figures to Six: How to Build Wealth on Any Salary

By Scott Hefty, Senior Wealth Manager and Founding Partner at Serae Wealth

Building a six-figure net worth on a five-figure salary may seem unreachable, but it is possible when time is leveraged and the right steps are taken. 

Don’t Let Debt Prevent Financial Growth

Most people hamper the growth of their wealth with debt. For many, the place to begin their wealth journey starts with paying down any high-interest debt, such as credit card debt, as fast as possible. High-interest debt will make you “struggle against high-interest costs” at a rate of 15%, 20% or even more every year. Regardless of what anyone says, no investment will consistently grow faster than the interest you are giving away. One needs to stem the tide of swimming against the current. As difficult as the sacrifice may be at first, once high-interest debt is eliminated, the benefits compound quickly over time. One just must get the ball rolling by eliminating debt, and sometimes that can take extreme, but temporary, sacrifices. It is always worth it in the long run.

Don’t Miss Out on Employer Benefits

Take advantage of any “freebies” available to you. It’s becoming more common to see employers offer tuition reimbursement to their employees, which can be applied toward education or student loans, and many companies also match contributions to retirement plans like 401(k)s or SIMPLE IRAs. Taking advantage of the free money that is available leads to a 100% return on savings from day one. Think of it like Monopoly: you never pass Go without collecting $200, and you shouldn’t pass up employer-matching dollars either.

Don’t Get Too Fancy Too Early

Most people who hit significant pitfalls try to get too fancy too early. The reality is that for most people, how they grow and save up to their first million is very boring. They sacrifice and save to pay down debt and begin investing in modest amounts. And those investments are typically in boring index and mutual funds. Once a person reaches a net worth north of $1 million, it can then make sense to explore a broader range of options.

The Six-Figure Net Worth Journey Begins Small

Progress often starts small. Do not get discouraged if you are not able to save in large amounts. Just start. Begin setting money aside for the future. Even if it’s not a large amount of money, what you do have is time, and when it comes to money, that’s more valuable. Compound interest is a very real thing, and most people severely underestimate the long-term impact even the smallest progress will bring them.