- By Emma Andrews
- Posted November 11, 2020
How to Build Your Wealth at Any Age
There can be a great deal of uncertainty and confusion about how to make sure that you are preparing yourself properly for retirement. There are many factors involved with individual wealth management. These can apply whether you are just beginning or more experienced in managing your assets. Here are some things you can do to start saving.
Reduce your Expenses
Thankfully, reducing your expenses has little to do with whether or not you eat avocado on your toast, and more to do with an overall philosophy over money. Those who are wealthy and intent upon building wealth spend less than they earn. This seems obvious, and yet it is complex to live within your means. The latest treats, newest gaming systems, newest model cars will, after all, lose value the second they drive off the lot or come out of the box. Being careful with large purchases can build wealth because you are not overspending initially, and not causing yourself to have excess debt. Debt hangs over your head for every moment that you continue to have it. This is why it’s important to not have more debt than is absolutely necessary.
Eliminate Your Debts
Many of us have some debts, especially those related to education, housing, and vehicles. Debt, however, eats away at your net worth. You must work to pay down debt in order to build wealth. A wonderful side effect of paying down debt is that it brings a greater peace of mind. One technique which works is called the Avalanche Method. You pay the minimum amount on all debts, except for the one with the highest interest rate. On that debt, you pay the maximum that you can afford to pay until the debt is paid. Then you begin again on the next highest interest rate. The goal is that each time a debt is paid off, the money which was being used to pay that debt can be used to begin to pay off the next debt in line. The goal is to pay the least amount of interest as possible while paying off your debt.
Invest In Stocks
There might have been a time when investing in stocks and bonds seemed a magical art for only a few initiates. Thankfully, there are now more and plentiful ways to invest in stocks, even in small increments. First, you need to eliminate as much debt as possible, so as to free up more of your finances. Apps like Robinhood and Public are designed to begin investing in stocks in small increments. Acorn, another app, rolls up the tiny increments of your purchases—from $.70 to $1.00, for example—and invests that thirty cents in stocks for you. Tiny increments over time can begin to build up!
Build Home Equity
There are various home improvements which you can make which help build your wealth, so that when you sell, they have increased it. For example, decks have a lot of great benefits for large families, or for having guests over to entertain. They tend to last for an extended time if well cared for, and increase the value of a home. If your goal is to build equity in your home, and yet enjoy it at the same time, skipping trendy sound systems that depreciate, and instead investing in an improvement which has a lot of great benefits for both your family and future owners, can improve home equity over time.
Don’t Buy Junk
There is an adage which says it’s best to save up, buy the best quality items which are possible without incurring debt, and then pass it down to your children and your children’s children. Those pressed board bookcases are not future family heirlooms! You will replace them three or four times. The same is true of a poorly made couch, poorly built home, or badly designed outfit. You do not have to go into debt to buy quality items! In general, buying junk will only give temporary pleasure. Saving up for quality items establishes your home and business as having style and provides a solid foundation of beautiful, well made items. In a culture where more is often seen as better, this is one time when following the trend, towards minimalism, is good
Real Estate Investment
Real estate investment comes with its own set of rules and practices, but you can begin investment intelligently with your own home. Buying a well built home in a great location can build your wealth over time. Cost of mortgage should be relative to the amount of money you can afford. If you have student loan debt, medical debt, or other debts which must be paid, those might not be factored into your expenses by your lender. As with all things, do not buy more than you can afford.
Streamline
It can be so easy to sign up for various things over time. Do you have a gym that you never use, and prefer walking your dog instead? Do you get three monthly subscription boxes? Do you have extended digital satellite options, and never have time to watch TV? All of those things add up, bit by bit. There are apps and services which can help you determine if you want to cancel recurring payments on your cards. You cannot build wealth successfully unless you truly know where your money is going.
Budget
Budgeting can seem boring: a small word that is generally a killjoy. When you realize, however, that it is knowing where your money is, and where it is going, that makes every other step on this list a possible one, budgeting becomes more fun. You will become more aware of exactly what is needed to run your household monthly. More importantly, you will know exactly where your money is going. If you are a beginner in building wealth, you need a budget. If you are an expert in wealth management, you still need, and probably already use, a budget.
It’s easy to put off beginning this process. However, greater financial stability is worth the work. Regardless of your age, each step is possible to begin, and build upon the others, in order to propel you forward into a brighter financial future. Saving now will help you to feel peaceful during complex times in the future.
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