6 Strategies To Reach $200K Liquid Net Worth for Peak Happiness
Money can’t buy happiness as the saying goes, but for some individuals, “peak happiness” does have a specific price tag. And that price is a $200,000 liquid net worth, according to a recent Cardrates.com study.
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The study found that more than half of Americans — 56% — said “they would be content” with a liquid net worth of that size.
But first, what is “liquid net worth?”
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Examining Liquid Net Worth
Consumer finance expert Kyle Enright, president of lending at Achieve, noted that it’s important to keep in mind that liquid net worth is different from net worth: Liquid net worth is how much you have in cash and cash equivalents, less any liabilities.
Cash equivalents are financial instruments you can turn into cash quickly, said Enright — for instance, CDs, money market account funds and some debt securities.
“Liquid net worth doesn’t include non-cash assets and assets you can’t turn into cash quickly — such as real estate or, in most cases, retirement accounts,” he said.
And as Scott Lieberman, founder of Touchdown Money, argued, a liquid net worth of $200,000 “is usually enough to give you all the flexibility you could want.”
Here are some strategies financial experts suggested to achieve “peak happiness” with a liquid net worth of $200,000.
Slow and Steady Wins the Race
Bobbi Rebell — CFP and personal finance expert for Cardrates.com — said that the study’s findings underscore the fact that the majority of Americans value security and financial stability over the ability to live the flashy, often splurge-driven lifestyle depicted in so much of the media. That’s healthy and encouraging.
For that reason, she said, the good news is that a slow and steady system of saving and investing will get a lot of Americans where they need to be — and likely with a lot less pain and struggle than if they were aspiring to have millions in terms of net worth.
Pay Down Credit Card Debt Quickly
Another tip to build up savings is to pay down debt so that interest doesn’t eat up your extra income.
“To do this quickly, transfer your balance to a balance transfer card which offers up to 21 months with no interest piling up,” said Andrea Woroch, consumer and money saving expert at Andrea Woroch.
She added that this allows you to pay down balances faster and avoid wasting money so you can start socking away your extra income.
Continuously Trim Expenses and Get Your Budget Right
Making $200,000 in liquid net worth is not just about earning more money — it’s also about spending less. In turn, reviewing your budget on a consistent basis to identify ways you can cut back without sacrificing your lifestyle quality is wise.
“If you continually save these dollars, you can siphon them into your investment accounts or your emergency fund,” said Erika Kullberg — attorney, personal finance expert and founder of Erika.com. She added that, by doing so, you’ll grow your savings faster, and you’ll begin to understand your dollars better as you bring the core objectives of your financial goals into greater clarity.
Resist Lifestyle Creep
Another pitfall to avoid in order to reach that goal is to resist lifestyle creep. In other words, as your income grows, resist the urge to increase your spending.
“Instead, focus on maintaining or even reducing your current lifestyle expenses,” said Chad Gammon, CFP and owner at Custom Fit Financial. “This will allow you to save and invest more of your income, helping you reach the $200k net worth target more efficiently.”
Increase Your Savings and Put the Money Into a Savings Account
You can also increase your liquid net worth by placing your savings in CDs, money market accounts or other cash equivalent, some experts noted.
Achieve’s Enright said that while this may be the most direct way to increase liquid net worth, it might also be the hardest for many consumers.
“Determining a percentage of your income you can consistently devote to savings with each paycheck — and then automating that savings — is the best way to make it happen,” he added.
Develop Multiple Income Streams
Relying solely on your primary job may not be enough to reach $200,000 quickly, so you might consider side gigs, freelancing, or investing in income-generating assets such as rental properties and dividend-paying stocks, said Gammon.
“Diversified income streams can accelerate your wealth accumulation and provide additional financial security,” he added.
Kullberg echoed the above sentiment, saying that diversifying your income is key.
“If you’re making $100k but spending $100k, you’re not going to go anything toward the $200k liquid net worth goal, and the sooner you do this, the sooner you have the opportunity to reach ‘peak happiness,'” she said.
In turn, having different income streams allows you to reach a $200,000 liquid net worth quickly, she added.
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This article originally appeared on GOBankingRates.com: 6 Strategies To Reach $200K Liquid Net Worth for Peak Happiness
