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Almost everyone probably wants to become wealthy at some point in their lives. Some people choose to live frugally to save more; others take risks by investing in high-return investments to build wealth.
In this article, we are going to explore the best ways you can quickly build wealth. Keep reading to learn more.
What Is Wealth?
Everyone has a different idea of what wealth is. For some, it means owning property; for others, it means having lucrative investments. From a financial standpoint, the term wealth is the number of assets you own minus debts.
How To Determine Your Wealth
Add the total market value of all your tangible and intangible assets, then subtract debts.
Building wealth may seem somewhat impossible, but it is actually quite simple. In fact, you don’t have to earn six figures to turn this dream into a reality. No matter how old you are, you can amass wealth as long as you’re determined.
Keep in mind that building wealth is not an overnight process.
3 Tips To Grow Wealth
Take a look at these three tips below for ways to build your wealth.
1. Increase Your Income
Whether you’re just starting or in transition, having multiple income streams is the most fundamental step to building wealth. Here are some of the ways you can increase your income and build wealth fast.
Venture into Business
The wealthiest people in the world are not employees but business founders. Entrepreneurship fulfills two aspects of wealth building: income and high returns on accumulated wealth. Therefore, if you have a business idea that can increase your income, get started.
It doesn’t have to be a huge business. You can start a small business and offer the services you’re good at. For instance, with the emergence of the internet, you can create an entirely online-based business. If you’re busy with other things, you can hire people to run the business for you.
Take Up High-Paying Jobs
You can check out the U.S. Bureau of Labor Statistics for a detailed occupation database. From there, you can see the high-paying jobs and their subcategories that you can apply to. More than 100 professions pay an average of not less than $80,000 per year. Good examples of professionals paid highly include physicians, managers, nurses and engineers.
However, some of these professions are very expensive. They may also take a lot of time to complete the requisite coursework, and it can be even longer before you start earning a high salary. You should consider all these factors before picking a profession. Whichever career path you choose, make sure it doesn’t leave your debt levels too high.
Run Side Hustles
Even if you have a job, you don’t have to only rely on your paycheck. You can run a successful side hustle to increase your income. You can turn your talent or hobby into monetary value during your free time.
There are many lucrative side hustles you can run online as long as you have internet access. These include:
- Working as a virtual assistant
- Freelance writing and editing
- Online tutor, coach, consultant
- Web design, app development, coding, etc.
Other side hustles that don’t need internet access include:
- Part-time professor at a local college
- Part-time gym instructor
- Freelance bookkeeping, tax preparation, tutoring
- Becoming a shopper
- Part-time driver for a ride-sharing or delivery service
Improve Your Skill Set
There are two ways you can grow your income and investments in returns. You can either lower your expenses or increase your income. Most people focus on the first, forgetting the latter. You can increase your income by honing your skill set. This could include getting a degree, an MBA or a special designation, which can all earn you a promotion and salary increase.
2. Save More
Saving money is another crucial step in building wealth. Once you have enough income to cater to your basic needs, it’s time to save. Remember, saving small amounts regularly compounds to substantial wealth over time.
Create a Budget
A budget is your financial plan, with expenditure estimates versus your income. A budget is an important tool in wealth creation. It gives you a view of your expenditure — the things you can cut on to increase your savings.
To maintain a feasible budget, it is advisable to create a new one every month. Can you imagine a sailor without a compass? That’s what a person who spends their money without a budget is like. Such a person will likely eventually suffer a devastating financial crash.
One of the most popular and effective budgeting techniques is the 50/30/20 rule. This method suggests that 50% of your income goes to essentials, like food, rent and healthcare. 30% allocation goes to non-essentials, such as shopping and luxury activities. The remaining 20% is the most important allocation, which should go to savings.
Build an Emergency Fund
Emergency fund kits prepare you for unexpected events, like losing a job. Such occurrences can disorient your wealth-building without emergency funds. Two common outcomes are selling the investment or incurring debts.
If you incur debts, your wealth starts diminishing. Also, you’ll have to pay interest for the debt. If you sell your investment, you lose the capital and interests you would otherwise earn. So, to avoid such scenarios, build an emergency fund as your backup money to settle surprise expenditure.
Pay Off Debt
Debt –whether it’s credit card debt, mortgage debt, student loan debt or any other kind — can pull you down every time you try to build your fortune. You can start by paying off high-interest debt, so you can save money and start building wealth.
Live Below Your Means
Overspending can dramatically impact your ability to build wealth. Cut spending on unnecessary things like eating out, buying designer clothes and regular vacations. While being frugal can be boring and unsatisfying, you’ll amass wealth over time and find it rewarding.
Once you’ve set aside a monthly saving goal, it’s time to invest. When you invest your money, it gives you more money in return. Investing your income in the stock market, and in real estate and retirement accounts like a 401(k) or a Roth IRA, can build you massive wealth over time.
Buying company shares is one of the best and straightforward ways to build wealth. Through shares, you become a shareholder, owning a piece of the company. Buying stocks through exchange-traded funds is a transparent and risk-free form of investment.
ETFs are passive funds that are less risky. They help investors evade high fees and taxes. They also allow you to diversify your equities. That means you can focus your investment on specific ETFs, like emerging markets, developed markets or American markets.
Even though stocks are much riskier compared to other assets, they have the best return on investment. With a well-informed diversification strategy, you can lower the risks and maximize the returns.
Investing in real estate investment trusts gives you a chance to profit from the real estate industry without direct involvement. REITs are essentially real estate company stocks involved in buying and selling properties. Mortgage companies also fall into this category.
Every time the company’s value increases, you gain as well. REITs boast of very high dividends, which you can reinvest for more returns.
A 401(k) is a defined contribution retirement account that employers offer their employees. You can dedicate a percentage of your pre-tax salary to this account by signing up for automatic deductions from your paycheck. Your employer can also match your contributions.
The investment earnings in a traditional 401(k) grow tax-deferred until withdrawn. If your employer offers it, you should take advantage of it. Though this is not a fast method on its own, you’ll be surprised at how quickly your wealth can increase if you combine it with other strategies.
A Roth IRA is an individual retirement account that allows for tax-free withdrawals, as long as you meet certain conditions. Investing in a Roth IRA is a perfect option if your employer doesn’t offer a 401(k). The 2021 contribution limit per year is $6,000 for people under 50, while those 50 and above can contribute up to $7,000. The best thing about a Roth IRA is that you fund after-tax dollars, unlike a traditional IRA, where you fund pre-tax dollars.
Building wealth is not a rocket science process. With dedication and discipline, you can grow your wealth fast. Before starting on this journey, it’s important to equip yourself with financial education. That alone should catapult you through the other steps seamlessly and eventually build wealth.
Many people overlook retirement accounts when it comes to building wealth. You’ll not only save for retirement but also grow your wealth over time.
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