Amassing wealth is a common goal shared by many people, and you may dream about reaching a point in your life when you can relax without the stress of financial concerns and live your life on your own terms without being tied to a job. The reality is that financial security is attainable by most people with the right strategy. However, many people find the process of building wealth and securing a comfortable future to be frustrating and even seemingly impossible. The good news is that you can make a few changes now to create drastically improved financial results in the years to come.
Reduce Your Living Expenses
The ultimate secret to building wealth is that you must make more money than you spend. This may sound too simple to be true, but you can see the logic in it. You simply cannot begin to accrue money in your accounts if you are spending every dime you earn. With this in mind, you must reduce your living expenses as much as possible. The more you can reduce your expenses, the more money you can save and invest each month. Take a closer look at your living expenses, and eliminate all unnecessary items from it. Consider taking on a second job to increase your wealth-building capabilities.
Debt can be used strategically to help you buy expensive items, such as a car or a house. However, debt is expensive. Interest charges and loan fees cost you money each month. They essentially take away your ability to save and invest money. If possible, drive your old car until it falls apart. If you do need to apply for a loan, do not apply for collateral loans you cannot afford. Ideally, only apply for loans on appreciating assets, such as real estate, rather the depreciating assets, such as cars. Avoid credit card debt altogether. Follow the basic rule of if you cannot afford to buy it with cash, you cannot afford to buy it.
Once you get to the point where you have money accumulating in a savings account, you must educate yourself about investment options. Money can work for you in the sense that money can actually create more money. This is possible through the effects of compounding interest, dividend reinvestment and more. For example, some stocks produce dividend income, and you can use the income to purchase more stock shares. The new stock shares will produce even more dividend income the follow quarterly, and this process will continue on. Your money is therefore working for you to help you amass more wealth.
Automate Your Investment Purchases
Your assets will grow in value more significantly when you use compounded interest or dividend re-investments as well as when you make your own frequent and regular contributions. When your personal monthly expenses are well below your income level, you will have a substantial amount of money to save and invest each month. Setup automated savings and investment contributions to your various accounts. This helps you to build account balances on a regular basis.
Taxes can take up 10 to 20 percent or more of your income each year, and this includes income from your take-home pay as well as from your investments. Minimizing your tax burden is important, and there are several strategies to consider. For example, maxing out your contributions to a tax-advantaged retirement account is one option. Educate yourself about taxes, deductions and credits so that you can be a more informed taxpayer.
Now that you understand the basic steps associated with amassing wealth, you can see that anyone can accomplish their financial goals regardless of their income level. You simply have to develop the right strategy and follow through on your plan by taking daily strides in each of these areas. Over time and with proper effort, you can reach the financial milestone you have in mind.
Finally, these are solid approaches if you want to build wealth quickly. Some of these approaches are riskier than others, but here are some articles to start with:
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