The stock market, bond market, and real estate are all risky investments. It is a crap shoot. We have absolutely no control over the management decisions made by the corporations we invest in. Likewise, we have no idea whether the interest rate will go up or down. And neither do we know what the economy is going to do. Whether it is events in the Middle East, North Korea, or elsewhere, we really have no idea how world events will shape our lives tomorrow.

With those thoughts in mind, here are three low-risk ways to increase your net worth.

1. Pay Down Debt

   Debt will wear you down. Don't let the interest rate or the homeowner's tax deductions fool you. The total interest paid on a 30-year home mortgage loan is astronomical. On a $500,000 loan at 6.5% interest, the total payments over a 30-year period would be $1.137 million. This amounts to over $637,741 in interest. The rationale I often get is that there is a tax deduction. Assuming you are in the 30% Federal tax bracket, you still pay 70% of $637,741, which equals $446,418 in interest. That is still a lot of money to be shelling out. Creative interest-only loans and adjustable-rate mortgages usually put even more money in the bank's pocket.

   Simply minimizing the amount of interest paid out to lending institutions can have a huge impact on your financial status. Here are two things you can do:

   1. List all your liabilities and start paying off your loans, starting with the ones that have the highest after-tax interest rates. Put all your resources toward paying off one loan at a time. Do not spread your resources between two different loans.

      Some of the notes for equipment purchases tend to have high interest rates. Paying off debt reduces the pressure you feel in your practice on a daily basis. It frees you up to do better work. It is liberating.

      As an example, paying off an equipment loan at 8% interest is really equivalent to a guaranteed 11% before-tax return. How can you beat that?

   2. If your FICO score is good and interest rates have gone down recently, consider consolidating loans to a lower interest rate. Go for a fixed rate, never an adjustable rate.

      Consider investing in stocks, bonds, or real estate only after you pay down high-interest debt.

2. Maximize the Income From Your Practice

   Harness the full potential within yourself and within your practice. With careful thought and concerted action, you could easily make an additional $50,000, $100,000, or $200,000 in net before-tax income every year. Think of what that can do for you annual savings. If you can save an additional $30,000 each year (which is a fairly modest goal), that creates far more wealth, more reliably, than trying to eke out an extra 1% or 2% return on the stock market. It is true that an additional 2% per year on the stock market can add up to sizeable numbers because of the effect of compounding, but the returns are not something you can hang your hat on and the risks are substantial.

   Your best, lowest-risk financial opportunity is to earn more from your practice.

3. Control Your Expenses

   Watch your expenses both in your personal life and in your practice. Often, just writing down all personal expenses in an accounting book helps you identify and control wasteful spending. In your practice, keep a close eye on overheads and embark on growth initiatives only after you rein in overheads.

If our perspective strikes you as good sense, we invite you to request a confidential practice assessment so that we can quantify for you the hidden profit potential in your practice. It's free. Request a practice assessment.