Building wealth can be a very daunting idea, but it is not nearly as difficult as some people make it out to be. You don’t need to be earning a huge amount of money and you don’t need to be very financially sophisticated in order to achieve this aim either. There are a few simple things that you have to get right though. As it is with all things in life, following a simple plan can have an everlasting on you when it comes to building wealth.
For instance, if you are spending more than you are earning, increase your income somehow or cut back on your expenses. It’s all about smart money management and it doesn’t take a rocket scientist to figure it out. For instance, I recently started teaching graduate students part time as a way of increasing my passive income. I’m sure you too can come up with an idea of your own. Also, save at least 10% of your net income each month. That’s enough (in the long run) to be able to achieve all of your financial aims and then more. Come up with a budget if you need in order to make sure your spending is never more than your earnings. It works for many, it can work for you as well.
If you have debt of almost any kind, pay it off first. The only time it’s excusable not to do so iis when some need needs to be paid off. For instance, if I had an internet service provider’s bill to pay off and credit card debt, I’d pay the latter off first. But if I had a mortgage, an internet service provider’s bill and credit card debt to pay off, I’d pay off the mortgage, then the debt, then the service bill in that order. Garnering interest-laden debt over time is perhaps the single-biggest impediment to building wealth. That’s because you can (or should) really start saving only after paying off your debts.
For something as simple as an auto loan, try and pay as much as possible in cash since you can save thousands of dollars over a lifetime by not paying the interest charges on it. Those savings you put away each month? Yeah, you can use that for this. Also, invest your funds in income securities. If you’re saving for something in the medium to long term, sacrifice the growth of equity for the assurance of fixed income. These also minimize credit and interest rate risks. As long as the principal amount is secure, 1% of interest will make no difference to you in real terms. If the value of these securities don’t fall with a rise in interest rates, you will be well on the way to building wealth.