The basics to build wealth are not complicated, they are actually relatively simple. Personal finance is a sensitive subject to talk about for some people. It causes stress and tremendous amounts of anxiety for people; typically those who do not plan properly. There is no secret formula to reaching financial freedom other than following the basics to building wealth.
Building wealth might be challenging, but it is well worth the fight if you follow the guidelines laid out for you. If you want to build wealth, you’ll have to understand it a bit better. Wealth is different than what most people imagine.
Most people think of expensive cars, jewelry and glamorous lifestyles that the rich and famous enjoy. In reality, the wealthy people in the world are smart with their money and their personal finances.
Real wealth is reaching financial freedom. Real wealth is created by saving your money, investing your money and having your money work for you. Real wealth is earning money while you sleep. The key to building wealth is investing in income producing assets that will provide you with passive income.
Save More Than You Spend
This might sound obvious but it is the most important component in your personal finances. Many people underestimate the power of setting cash aside each month to contribute towards a savings account. Teaching yourself how to manage your cashflow will help you build a stronger financial foundation and prepare yourself for future endeavors.
You should always be learning new ways to save more money while maximizing your income simultaneously. If you can boost your income and bring in more money for yourself, it will give you the ability to save a little extra every month. The more you are able to save over the course of time, the easier the basics to build wealth become.
While it might not sound significant today, every dollar that is saved rather than spent is beneficial for your financial future. Whether it is a few hundred dollars per month or only a few bucks here and there; make an effort to continue maximizing your savings.
Those who spend money on unnecessary expenses will soon regret their decisions when economic hardships come. Overspending can cause you to fall into bad debt and lead to financial ruin.
People who live far below their means enjoy a freedom that people busy upgrading their lifestyles can’t fathom.— Naval (@naval) November 15, 2017
Rather than spending on things you don’t need, make a clear effort to put that money towards your financial future and invest your savings. If you are diligent about your finances and live below your means, you will find financial freedom without a doubt.
Avoid Consumer Debt
The basics to build wealth start and end with avoiding debt. Avoiding consumer debt cannot be stressed enough. Debt is a nationwide pandemic that weighs down most Americans and their personal finances. People often like to borrow money to buy things for their everyday life. This can range from big-ticket items like a car down to cheaper items like clothing or a computer.
Credit cards are heavily relied upon by people all over the world because of their flexibility and their usefulness. Instead of carrying around cash, credit cards give you the ability to carry one single card to spend freely as you wish. The problem with this, is that it gives people access to spend money too easily for some people to control.
While credit card debt affects almost 55% of Americans, there are plenty of other kinds of debt that can affect your finances. Auto loans are another popular financing tool people tend to use if they can get approved by an auto finance company. There are a few other kinds of debt that can weigh down a person and their personal finances like student loan debt and medical debt as well.
Here are the different types of debt:
- Student Loan Debt
- Credit Card Debt
- Auto Financing Debt or Car Loans
- Medical Debt
If you are searching for ways to reduce or eliminate your debt, you might have a few different options available for you. Debt relief is a popular way people look to when they are facing a lot of debt. Debt relief is helpful for consumers with debt as little as $5,000 up to larger debt loads upwards of $100,000 or more.
Invest in Knowledge
Education cannot be overlooked, no matter how old you are. Investing in knowledge to continue your education will pay off in the future. People are willing to throw money at fancy clothing but are hesitant to invest into an educational resource that will help he or she become a more knowledgable person and a more valuable asset.
There are many different ways you can educate yourself to learn new skills to earn more money.
With student loan debt is at an all-time high, it is helpful to look into free or pay-as-you-go online courses to keep your costs low. You can continue your learning in many ways through online academics and study guides. There are a handful of free online courses you can enroll in that can help boost your skillset. Here are a list of different programs you can look into if you want to advance your career through an online educational course and even get certifications in specialized fields.
- Coursera – wide library of different courses
- Udemy – online learning platform designed for adults
- Skillshare – learn from professionals in almost any field
- FreeCodeCamp – teach yourself how to code for no cost
- Facebook Blueprint – online training for marketers
- Google – library of certifications for data, analytics and marketers
- HubSpot – certifications for advertisers and marketers
As you continue to develop your tool box of skills, you will make yourself a more valuable candidate during any job search and help you earn more money throughout your career.
Create Multiple Sources of Income
It might sound unimaginable to think about, but creating multiple sources of income can drastically improve your personal finances. Creating multiple streams of income is like second nature to most maillionaire’s. They understand the basics to building wealth and create multiple source of income throughout their career. In fact, the average millionaire has 7 streams of income. There are many different ways you can build your wealth and make more money.
Here are ways you can create multiple sources of income:
- Save your money – save anywhere from 10-20% of your income each year.
- Invest your money – invest your money into income producing assets like the stock market or an REIT.
- Turn your learnings into a side hustle – start earning income from the new skills you acquire.
- Keep re-investing – don’t take out your earnings from your investments; keep re-investing to create more wealth.
One highly recommended way to diversify and create a new income source for yourself is investing your money. If you have cash saved up that you don’t need for the next 5-10 years, it is recommended to invest your money into income producing assets.
Investing requires patiences with the market and trust in the overall economy. Whether the economy is thriving or struggling, continuously contributing to and averaging into your investments are strongly recommended. There is no “right” time to invest, so it is important to have a diversified portfolio with good quality companies that will grow over time.
Manage Your Time
While it is always recommended to save money, time is your most valuable asset. Time is a non-renewable resource that nobody can re-create. We all have 24 hours in a day and the goal is to maximize your time to the fullest.
Similar to time being your friend when you are investing, time is your ally in everyday life if you manage it correctly. Manage your schedule efficiently by setting up meetings only when you need to. If you can accomplish your goals through a phone call or an email, do that rather than holding a meeting.
Another way you can manage your time better is paying for something to be done if it saves you time in the end. Don’t waste your time on time-consuming tasks if you can pay to get it outsourced for an affordable rate. Nine times out of ten, your time will be more valuable than the task at hand and you can pay to get it done for a fraction of what you think it would cost.
From coordinating travel plans to laundry to cooking meals; they can be done by someone else for a cheap price to free up valuable time for yourself. You will be amazed at what you can do with extra free time. You can take that time to learn a new skill to create a new side income and start earning new streams of income for yourself.