7 Ways To Build Wealth Without Having a Mortgage
Written by
J. Arky
Edited by
Ashleigh Ray
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Your parents may have told you to buy a home as soon as you could, because renting is only “throwing your money away.” Yet, many millennials delayed homebuying for a variety of factors, including financial concerns, student loan debt and simply not wanting to deal with the hassles of homeownership.
It’s a new generation and the dawn of a new fiscal planning era. Owning a home isn’t the only way to build wealth. In fact, there are many ways to do it without having to get a mortgage on a piece of property, whether or not it’s your home.
Here are seven ways to build wealth without having a mortgage.
Prioritize Savings and Investments
If you can’t buy a home, don’t fret. You can still build a nice financial home in your portfolio, shifting the focus to investments and savings.
“By consistently saving a portion of your income and investing it wisely, you can accumulate wealth over time through the power of compounding returns,” said Taylor Kovar, CFP, founder and CEO at 11 Financial. “Consider investing in a diversified portfolio of stocks, bonds, mutual funds, and other asset classes that align with your risk tolerance, investment horizon, and financial goals.”
Maximize Retirement Contributions
Tyler Meyer, CFP® and founder of Retire To Abundance, said “maximizing retirement account contributions, such as 401(k)s and IRAs, allows for tax-advantaged savings and compound growth over time.”
“Maximizing contributions to tax-advantaged retirement accounts such as 401(k)s, IRAs, and HSAs can provide significant tax benefits and accelerate wealth accumulation,” Kovar said.
“Contributions to these accounts may be tax-deductible or grow tax-deferred, allowing your investments to compound more efficiently over time. Additionally, take advantage of employer matching contributions to maximize retirement savings potential,” Kovar said.
Take Advantage of Compound Growth
“When you invest in stocks, exchange-traded funds (ETFs), or mutual funds, your money has the potential to grow over time, thanks to the impact of compound growth,” explained Maya Sudhakaran, head of growth and acquisition at Plynk.
“Compound growth is the idea that when your money grows, the new money that you’ve made will also grow if you keep it invested,” Sudhakaran said. “To increase your money and build wealth, consider investing in stocks, ETFs, or mutual funds offering higher potential returns. Yes, alongside higher potential returns also comes a higher risk of investment loss, but if you can keep your money invested for the long haul, it could pay off with the help of compound growth.”
Rethink Real Estate
“While not owning property directly, you can still benefit from real estate investment alternatives such as real estate investment trusts (REITs), crowdfunding platforms, and real estate mutual funds,” Kovar said.
Kovar explained that these investment vehicles “allow you to invest in real estate assets without the hassle of property management or large capital requirements, providing exposure to potential rental income and property appreciation.”
Utilize a Money Market Fund
“Money market funds are a great place to keep cash (with relatively low risk) and still have a chance to grow,” Sudhakaran said. “You can also put your money to work even if you’re still unsure how to invest it.”
Plynk recommended finding an online brokerage where “cash in your investing account is automatically put into a money market fund.”
Assets Are Your Friend
Prioritizing investments in income-generating assets such as dividend-paying stocks, bonds, rental properties and business ventures is what Kovar recommended.
“These assets can provide a steady stream of passive income, which can be reinvested to accelerate wealth accumulation or used to cover living expenses, reducing reliance on traditional employment income,” Kovar said.
Additionally, if you can diversify your investments, including your assets, that can protect your financial future in the long run.
“You can minimize risk by spreading your money across various investments,” said Sudhakaran when describing diversification. “For example, by owning many different investments, you reduce the potential impact that a decline in 1 or 2 individual stocks or funds may have on the overall value of your investments.”
Live as Frugally as You Can
At the end of the day, if you end up saving money instead of spending it, that’s still money in the back that’s adding to your overall wealth.
“Embracing frugal living and adopting a minimalist mindset can further accelerate wealth accumulation by reducing expenses and increasing savings rates,” Meyer said.
Simultaneously, if you can get rid of any debt from student loans, credit cards or car payments, then go ahead and wipe the slate clean.
“One effective approach is to prioritize debt reduction and eliminate high-interest debts like credit cards or personal loans, freeing up more funds for savings and investments,” Meyer said.
“By leveraging these strategies and staying informed about market trends and opportunities, individuals can build substantial wealth and achieve financial independence without the need for a mortgage,” Meyer said.
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