How do you build wealth?
Creating wealth may seem like a fantasy. Money doesn’t grow on trees, after all. But, a steady income, some smart money management, and good credit deals can go a long way. You’ve probably wondered how to create wealth at some point or another. And we’re here to give you 7 ways to do just that.
1. Save your Money
This one seems like a no-brainer, but if you don’t save money, then you’ll never be able to create wealth for yourself and your family. Saving money is simple in theory, but a lot harder in practice. You should be setting aside some of your paycheck every payday (at least 10%). For instance, if you make $2,000 every pay period, try putting at least $200 of that into a savings account. By the end of the year, you will have accumulated a nice start of $2,400 in savings.
2. Avoid Small Unnecessary Purchases
A five-dollar cup of coffee might not seem like an egregious waste of cash, but, over time, those coffees can add up. An average person can spend as much $1,500 each year just on coffee. By brewing your own coffee at home you can literally save hundreds of dollars in a year. This applies to any variety of other small purchases, as well.
3. Invest Wisely
Most of us aren’t seasoned investors. Financial advisors can help you, but they also cost money. So, how do you build wealth with investments? There are several routes you can take to do that:
- Money market fund
- Bond fund
- Guaranteed Investment Certificate (GIC)
- High-interest savings account
Funds are typically safer investments than, say, stocks. But, many experts advise clients to investment in bond or money market funds based on their age and put the rest into stocks. For instance, if you’re 35, you would put 35% of your investments into funds and 65% into stocks. Stocks are riskier but they yield more if you play it right.
4. Pay Off Your Debt
Debt is one of the biggest hindrances toward creating wealth. How do you grow your wealth if you’re stuck in a pile of repayment notices? For starters, prioritize the debts that have the highest interest rates and try to pay those off first. High-interest rate loans can bog you down and have you paying more over the course of the loan term. But, if you get them out of the way quickly, you can avoid those rising interest prices.
5. Don’t Go All Out on Your Home
Buying a home is pricy, but, with the right mortgage terms, you can end up paying considerably less than expected. You should always look for terms that favor you and your bank account. Low interest rates, principal payments, and amortization periods can help you save significantly. If you really want to save money in the short term, you can also try renting a place, saving up, and then buying a house.
6. Work, Work, Work
Working as much as you can might seem soul-sucking, but, in the long run, it’s going to help you accumulate more wealth. If you’ve ever asked yourself how to create wealth, then this is really it. It takes time and effort, but if you put in the work now, you will reap all the benefits later on. Hard work also puts you in line for possible promotions, raises, or bonuses.
7. Use Unanticipated Cash Intelligently
When you get a windfall of cash, your first instinct is to use to buy something special. Resist this impulse. Let’s say your Uncle Gary decides to give you $2,000 for whatever reason. Invest or save that money rather than using to buy something you may not need. That $2,000 will go further if you use it wisely.
What you should do now
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