There are numerous ways for you to build wealth and get rich. It’s important to note that what worked for one person may not work for the next. There are also many unrealistic plans that involve a significant amount of risk that could easily lead to you losing your hard-earned savings. This is why it’s critical that you always look at the source of information when accepting financial advice on building wealth.
One credible source sharing practical strategies for getting rich is Vivian Tu, the financial expert behind the brand Your Rich BFF. GOBankingRates will break down her plan for getting rich, which follows the unique acronym “STRIP.”
What’s the STRIP method for getting rich?
S for Savings
If you want to build wealth, you have to save money. Without money in your bank account, you can’t invest or start planning for your retirement.
However, saving money isn’t just about growing your funds so that you have more money to invest. It’s important that you have money saved for rainy days and whatever life may throw at you. Tu suggests that your emergency fund expands as you age, because you’ll likely have more expenses.
How Can You Start Saving Money?
- Pay yourself first from every paycheck with automated withdrawals.
- Create an emergency fund with at least three months’ living expenses.
- Cut out one fixed expense.
- Keep on building up your savings account until you’re ready to invest.
You can’t get rich without money saved up, so you have to tackle this first.
T for Total Debt
You have to pay off your debt if you want to get rich, so you’re going to want to make payments on your student loans and any consumer debt that you may have.
Tu is a proponent of the avalanche method, which differs from Dave Ramsey’s debt snowball. The premise of the avalanche is to pay off your debt by first tackling the balance with the highest interest rate. The goal is to make a dent on your debt by eliminating the highest interest rate quickly, since this is the best mathematical approach.
However, it’s worth pointing out that paying off debt is a personal journey, and you can choose another strategy if it feels right for you. The goal is to make becoming debt-free a priority.
R for Retirement
You have to set money aside for retirement so you’re not stuck working forever. It’s essential that you open up retirement accounts and fund them to prepare for your golden years. You can look into a 401(k) through your workplace or an IRA so that you have somewhere to grow your retirement savings. You’ll also get tax benefits from setting money aside for retirement.
Even though retirement might be decades away, it’s never too early to start planning for life after work. It’s also worth noting that the more aggressive you get about saving for retirement, the sooner you can leave the workforce.
You can also choose to open a Roth IRA, where you pay your taxes now so that you can make withdrawals tax-free in the future. Either way, you should consider speaking with a professional financial advisor so that you know which account is right for your situation.
I for Investing
You have to invest your money so that your money works for you, since there are only so many hours in a day that you can work. Tu supports investing in index funds over trying to pick out individual stocks. She’s not a fan of cherry-picking stocks.
The good news is that you can choose how you invest your money, and various options are available, from real estate to investing in higher education to increase your income in the future.
P for Planning
You have to figure out your finances by planning out how you will spend your money and how you will save. If you want to get rich, a decent amount of planning will be involved.
The good news is that you can dictate what being rich means to you. You don’t have to spend money on luxury cars and lavish vehicles if you want to feel like you’re rich. Your desired lifestyle could include living in a modest home while you get to focus on work that brings you joy.
How Can You Apply This Right Now?
What’s the best way to apply this advice to your life if you want to get rich in the near future?
Look at Your Finances and Write Out Your Numbers
You have to know where you stand by writing out your numbers and figuring out your financial situation.
What should you include?
- A list of the money that you owe
- Your current assets
- Your financial goals.
You must know where you stand, where you want to go, and what the gap between these two figures is like. Once you figure out how far off you are from your financial goals, you can make a plan.
Start Setting More Money Aside
If you want to get rich and become a millionaire, you have to make saving money a habit. You can simplify your finances by setting up automated savings. You can also get creative by embracing side hustles and finding unique ways to cut costs so you’ll have more money to allocate towards your investments.
Learn About Investing Options
How will you invest your money? It’s important that you begin to research different investing strategies to educate yourself about how to make your money work for you. You also have to look into different account options to have the right tools on your side.
While there are numerous options here, the goal is to find an investment strategy that fits your risk profile and desired lifestyle.
While there are many strategies for how to get rich easily available online, it’s important that you take advice from someone with a proven track record. If you apply this method to your finances, you’ll be on track to becoming a millionaire. The only thing left is to focus on consistency.
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