For many people, being wealthy is something that seems out of reach. They see a millionaire in the nightly news and think, “maybe he just got lucky.”
Well, let’s set the record straight – it wasn’t all luck. In this modern age, creating wealth is something that ANYONE can do, regardless of age or background. You just need the right strategies, tons of discipline, and the proper mindset.
That’s what we’re going to talk about today – the strategies for how to grow wealth. The good news is that all of them are very simple and easy to implement.
Build An Emergency Fund
Before you go about building wealth, you need to set your foundations down first. One of the most important of these is having an emergency fund. As the name suggests, this is money you have set aside that you can rely on when an unexpected financial setback comes.
Here’s the truth – something unexpected will always happen, no matter how great your life or the economy is. The recent health crisis made that very clear. You might lose your job, or your income might get reduced or cut. You or a family member may get sick, requiring hefty hospital bills.
The list goes on. If you don’t have emergency savings to cushion you during these times, you’ll may be in trouble. It might derail years of hard work in the blink of an eye.
Most financial advisors recommend that you have enough money in your emergency fund to cover 3 – 6 months worth of your living expenses. One strategy is to set aside a portion of your monthly income into a savings or retirement account that’s separate from your spending. Keep it there, and don’t be tempted to dip into it unless necessary.
Having an emergency fund might not be the most mind-blowing or innovative ways to build wealth, but you cannot underestimate its importance.
Keep Your Expenses To A Minimum
A common mistake most people make is thinking that how much you earn determines how wealthy you are. That’s not entirely true. The true measure of your wealth is how much you save. And a significant factor here is how much of your money you spend per month.
Let’s face it – even if you earn $1 million a month, you’ll become broke pretty quickly if you also spend $1 million.
That’s why one of the most critical aspects of how to build wealth is to manage your expenses effectively. The fastest (but not necessarily the easiest) way to do this is not to buy the stuff you don’t need.
Ask yourself if you can live without the new iPhone if your current phone is just a few months old (hint: you can!).
Even if you have increased your income dramatically, you should not let your expenses rise along with it. This is called lifestyle creep. Preventing it is one of the best pieces of advice on how to build wealth in your 40s. Why 40s? Because that’s when people usually have a higher income level, so they’re generally tempted to spend more than they should.
Beyond that, you can find ways to reduce your other expenses like housing. Some people consider renting instead of committing to a 30-year mortgage just to own a house.
Increase Your Short-Term Income
Want to know the secret of how to build wealth fast? Increase your income! Cutting back on your expenses is essential, but there’s only so much you can skim. Investing is an excellent way to do it, but it usually involves longer timeframes.
To become wealthy, you’re almost always going to need to add in way more income than you spend. Increasing your short-term income also gives you the extra funds to build your savings or to invest in your portfolio.
If you have a full-time job, the fastest way is to negotiate a salary raise with your employer. Of course, you will need to give your boss an excellent reason to promote you.
That’s why you need to invest in yourself. Learn new skills and get certified, then apply them to your work. If you make yourself valuable to your organization, you’ll have a higher chance of getting that raise.
Investing in yourself goes beyond just skills. You must also improve how you market yourself to your boss or prospective employers in the future.
If working for someone else is not your cup of tea, then get into entrepreneurship. Building your own company is a fantastic way to build your wealth and control your life. It’s also one of the few ways to become a millionaire that employment can’t give. Of course, it’s riskier than having a job, and the failure rate is also high.
Whatever income path you choose, always remember to stick with it and invest in your growth. It’s the best money you’ll ever spend.
Get Into Real Estate
One of the fastest ways to build wealth is with real estate. That’s because it has the potential of adding tons to your bank account in a shorter time than other investment strategies. The number of millionaires who grew rich from properties is a testament to this fact.
Real estate offers a wide range of options for you, whether you’re looking to be hands-on or not with the process. Most people can earn a decent living as a realtor, helping people buy or sell houses, and getting commissions in the process. You can get into house-flipping – buying an old property, improving it, then selling it for a higher price.
If you prefer a passive route, you can buy a property and rent it out. This can do wonders for your cash flow. You can even live off this income if you have enough properties to rent (assuming you’re in a good market).
Invest A Percentage Of Your Earnings
Another effective strategy for building wealth is investing.
Once you’re maximizing your monthly income and have reduced your expenses, you now need to make money work for you. This is where investing your money comes in.
We recommend setting aside a percentage of your income (a good ballpark is 15%) as investment money.
The power behind investing is simple. It’s basically “parking” your money where it will produce interest, compounding and growing over time. Hiding it under your mattress at home isn’t going to do that.
Investing your money is also important because of one economic concept – inflation. Your money needs to keep up with the rising cost of inflation, and the only way to do that is to earn more interest than the rate of inflation.
The traditional way of doing it is to keep your money in the bank. However, interest rates are usually so low it will take forever to grow your wealth.
A better way is to invest in the stock market or a mutual fund. You’ll see much better growth in these instruments than your bank. Maximizing your retirement accounts, like 401(k) or Roth IRA, is also a wise choice.
However you want to invest, make sure it’s legitimate. Do your homework, and never put your money in something you don’t fully understand.
Another suggestion is to speak with a trusted financial advisor. They have the experience and education necessary to guide you through the complexities of investing. They will be able to give you insight on where to best invest your money. With that comes monthly, quarterly, and annual financial statements. These are key in monitoring your investments and developing strategies to improve your stock selection, ultimately, improving your wealth too.
One of the biggest things holding people back to growing wealth successfully is loads of debt. Car loans, personal loans, mortgages, student loans, and credit card debt can take a big chunk out of your monthly income. This money could be better spent on growing your wealth through investing.
The best and simplest strategy for acquiring wealth is to pay off your debt as early as possible, then avoid getting into more debt. Of course, this is sometimes easier said than done. Some debt, like student loans, are completely unavoidable for the average American.
But a lot of the debt you accrue is all due to your habits and, therefore, can be controlled. A case in point is your credit card bills. It’s always tempting for people to spend beyond their means with a credit card. With the ridiculous interest rates of credit cards, this can quickly lead to huge credit debt.
If debt is hindering your wealth-building, you need to prioritize your payment strategies. This is where a debt relief program comes in handy. You can explore things like debt consolidation or refinancing to make it easier for you to pay your obligations.
If you have an exceptionally huge mountain of debt, consider entering a debt relief program. A professional company like CreditAssociates can negotiate with creditors on your behalf, drastically cutting down the amount that you need to pay monthly.
Working With CreditAssociates
Are you ready to build your wealth, but your debts are holding you back? Schedule a free one-on-one consultation with CreditAssociates and allow our debt experts to get you back on track with your wealth goals.