If you’re living paycheck to paycheck, your financial situation isn’t very different from most Americans. According to Credit Loan, three out of four people in the U.S do not earn enough to support their regular lives. But a combination of financial literacy and wealthy building assets can help solve this problem. The right planning and investments can help supplement your income and take you towards financial success.
Wealth assets are great tools for achieving financial freedom because they provide opportunities of generating income from multiple sources that yield high returns. This guide will help you learn what wealth building is about and how you can take that initial step toward financial freedom.
What is “Wealth-Building?”
Having money and having wealth are two entirely different things. It’s great to have an income that pays the bills, but the money doesn’t stay long in your pocket or bank account. But when you have wealth, it means you have a set of resources more than job-based income that can help secure your financial future.
But building wealth doesn’t happen quickly. It involves discipline and taking a series of steps over time. If the process of wealth building becomes your lifestyle, you grow wealth that you can pass on to your offspring.
Three Steps to Wealth-Building
There are three ways for you to build wealth over time: making money, saving money, and investing money.
Making Money
While it may sound obvious, it is important to state that having a reliable source of income for a long period is necessary if you’re trying to build your wealth. Regularly setting aside a small amount from this source of income can help you build big savings over time. Can your current job provide you with a regular amount of savings for decades to come? If not, you should start looking for ways to increase your income.
There are two basic types of income. The first type is called earned income, and the other is called passive income. Earned income comes from your regular job, while passive income is generated from your investments. If you want to earn a bigger income, you might want to consider a career change. When deciding to shift to another occupation, ask yourself a few questions that can help you realize your interests and the skills you’re naturally good at.
If you’re working a job that aligns with your skills and interests, you will perform better and start getting a higher income. Of course, choose a career that will pay well. Invest in improving or adding to your skills so you can have a higher chance to get your desired job. Once you have a job that generates a stable and high income, you are ready to start saving and investing.
Saving Money
Many people who find financial stability and live comfortably still don’t save money well. However, regularly setting aside a portion of your earned income is another secret to wealth-building. You can use your savings to start investing in something that can generate a passive income.
Here are some tips for saving money:
- Keep a record of your monthly expenses, and then eliminate the things that you don’t really need.
- Adjust your budget so you can set aside a regular amount every month without depriving yourself of things that make life comfortable.
- Make sure you have about 6 months’ worth of expenses saved as an emergency fund so your finances aren’t derailed every time there’s an emergency.
- Take advantage of retirement plans. If your current employer offers a similar plan, grab it.
Investing Money
Once you have a stable foundation, it’s time to invest your money. But keep in mind that investing entails taking risks. That is why it’s vital to determine which mix of assets is appropriate for you. A financial advisor can help you with this. We can help you set a clear investment goal and timeline, and realize how much risk you’re willing to take. Based on your financial advisor’s insights, you can build a diversified portfolio that is based on your preferences.
What Are The Best Wealth-Building Assets?
Traditionally, the best ways to build wealth are through investing in real estate, stock trading, and private money lending. These assets have been proven to perform excellently when it comes to generating continuous cash flow.
Keep reading to learn more about these three wealth-building assets.
Real Estate Investing
Real estate is a popular choice among those who want to start building their assets. Real estate has a proven history of being a high-yielding investment for knowledgeable wealth-builders. In fact, a 2017 study found that investing in real estate can generate a return rate of around 8%. Stocks come in next with an average return rate of around 7%. Several factors contribute to the high performance of real estate when it comes to wealth-building, including the potential for monthly cash flow through rental income and the numerous tax breaks given to investors.
For those interested in real estate investment, make sure to first determine your desired market and which areas offer the most opportunity. Your choices include residential properties, commercial real estate, and vacant land. Investing in residential properties involves renting out vacation homes or portions of your primary residence. Meanwhile, commercial real estate includes long-term leases that are attractive for investors.
Real estate investing is a good option for anyone who wants long-term financial security. Real estate can also generate consistent cash flow that you can reinvest in other assets or use to purchase additional properties. If you are interested in investing in real estate, contact our financial advisor from Money Mgt. Inc. today.
Private Notes Secured by Real Estate
Investing in real estate notes is an alternative to investing directly in real estate because you act as a lender instead. Real estate notes guarantee to repay a loan or mortgage. This kind of investment is attractive for investors who want to take on a more passive role. If you are interested in this kind of wealth-building strategy, it would help to do proper research to ensure financial success. A financial advisor can help you learn can learn more about this strategy.
Stocks of Publicly Traded Companies
Stock trading is another well-known wealth-building asset. This kind of investment allows you to buy shares of public companies. Stocks have a proven history of helping investors build wealth over time, offering a return rate of around seven percent. While short-term stock trading can be risky, many investors find that it’s a good way to build wealth over time. Unlike other wealth-building strategies, stock trading can offer more opportunities to diversify your investment portfolio.
What Wealth-Building Assets Should You Avoid?
Several investment types can be helpful for wealth-building, but there are also some that you should avoid. Any asset that loses value over time, or depreciates, is not good for wealth-building. called depreciation. Buying cars and boats, for instance, may seem like a fun way to invest. However, these assets require regular maintenance that will cost a lot in the long run. Investing in these kinds of assets will likely cause you to lose money, so they are not recommended for building wealth.
Another thing to consider when selecting wealth-building assets is liquidity, or how quickly you can sell the investment. For example, it can be difficult to find buyers for collectible assets like wine or stamps. You may end up selling them for a lower price, or waiting for a longer time before they become liquid assets.
Summary
Wealth building can help you secure a stable financial future, that is why choosing the right wealth-building assets is crucial to ensuring a successful investment portfolio and achieving financial freedom. If you are unsure how to start with wealth-building, contact Money Mgt. Inc today. We can help you devise the right plan that will take you towards financial freedom.
Recent Comments