Mirriam-Webster’s dictionary defines wealth as an “abundance of valuable material possessions or resources.” But wealth is not just a measure of how rich you are. It means having enough resources to build a secure future and leave a legacy.
How can everyday people build wealth in this day and age? Here are some tips to help you grow into prosperity.
Gaining Financial Independence
A recent survey asked Americans about their financial independence. It discovered that only a little more than 28% of adults in the U.S. consider themselves fully financially independent, while nearly 33% are fiscally dependent. Further, almost 50% rely on their parents to pay their bills.
How can Americans achieve financial independence, the first step to creating wealth? It will take discipline and time. Start by creating a monthly budget for your bills. Be sure to review it regularly and stick to it.
Next, create a plan to pay off credit cards and other outstanding debt. Pay off the smallest debt first to give you an early win. Watch your credit rating and work to improve it. The sooner you take action, the quicker you can start building a secure future.
Managing Your Finances
The next step is planning for financial success for the long term. Managing your finances to build wealth means creating a plan for the future. Some key actions you can take right now include:
- Be sure to have health insurance and life insurance. These policies can protect you from losing everything if you face a health crisis or other disasters.
- Find ways to reduce your taxes. Hire an accountant to make sure you are taking all your deductions.
- Start planning for your retirement, including investing in 401K plans.
- Consider potential income streams after you retire.
- Avoid indulgence. Instead, put your dreams on hold. You may want to create a vision board of your dream retirement or home to help inspire you to avoid indulgences like daily $5 coffees or excessive vacations.
Building Up Your Nest Egg
Put money into your savings every payday. Pick a monthly or weekly amount and add it to your budget. If possible, automate depositing this amount first when you get paid.
Be sure that you are selecting a bank account with high interest and low fees. Ideally, you are not withdrawing anything from your savings account. Think of it as your nest egg.
Whenever you have unexpected earnings or windfalls, add them to your savings.
Creating Wealth Means Creating Streams of Income
People rich enough to leave it for generations often did so through hard work. While there is nothing wrong with hard work, it’s difficult to create wealth by working a 9-to-5 job. The more you advance in your company, the more income you’ll earn, but you may lose privileges like overtime pay. You will also likely work longer hours.
A better way to create wealth is by earning passive revenue. This is wealth that accumulates without hourly wages. Most people who earn their riches today have at least three income sources with at least some passive revenue.
Creating more passive income with investments helps overcome this struggle.
Investing Wisely
Smart investments can bring you a good return. One approach is lifestyle investing, which embraces your goals and priorities better than traditional methods.
You can still put your money in classic investment vehicles such as bonds and fixed deposits. These are defensive investments that do not grow but provide security.
Growth investments, on the other hand, are riskier but just as important. One option is buying shares. Another popular choice is real estate.
Investing in property requires some knowledge. When buying mortgages to turn a profit, you should understand the market before purchasing. For example, buying in a seller’s market puts you at greater risk.
Other issues impact the value of realty, including:
- How long you intend on owning it
- Whether you’ll live there or rent it out
- The potential appreciation value
- The condition of the home and how much you are investing in repairs and renovation
Building wealth is an attainable goal for most people. It starts with addressing your debt and finances first and then building streams of income and a secure future. You can grow your assets if you take these steps today.
