Building wealth is perceived as a long and hard road by most people. We can all agree that wealth building takes discipline and commitment. But it does not have to be seen as a heinous journey. Cultivating financial management skills, money management habits and gathering information can help you in your journey in creating and compounding wealth. To build on your finances you have to increase the difference between your expenses and your earnings, save the difference and compound it over a period of time. I have outlined 7 ways to build wealth below:
1. Choose High-Paying Employment
Do research in your country of residence by going through a national employment database which lists out individual occupations. The database should include the breakdown of median payments along with payments associated with various subsets of such occupations.
For example, in the US over 100 occupations provide an income of more than $80,000 annually. Lawyers, surgeons, doctors, engineers, lawyers, nurses, financiers and other technical occupations tend to obtain a six-figure income. From your earnings place a sum of money into high yielding savings accounts and make 2% interest.
2. Side Hustles
If you have learned a skill, a talent or a hobby you can monetize it by turning it into a side hustle. Through side hustles a person can make an extra $5000-$50,000 to expand their current earnings from their employment. For example, if a person makes $40,000 per year after tax and expenses cost $30,000, a total of $10,000 remains for investing or paying debts. If this person can obtain an extra income of $5000 per year it would increase the total earnings by 12.5%. In addition, if one saves $5000 annually and invests it at 7% a year, an extra income of $100,000 will be available in fifteen years.
3.Become an Entrepreneur
Have you ever wondered why the majority of millionaires and billionaires are business owners and entrepreneurs? This is because entrepreneurship involves attainment of a high income and a higher rate of return on accumulated finances. You can start small and grow from there. For example, if an individual has practical and theoretical knowledge of plumbing or construction, they can start a contracting company and scale. Find a need, provide a service or a product and start your own company!
4. Life Insurance
Certain types of life insurance have an element known as cash-value, which allows a person to save up for retirement whilst being covered. You can compare life insurance policy online and find the best option with cash-value. For example, in whole life insurance your entire life is covered and premiums are divided for the payment of the death benefit and an interest-bearing savings account.
5. Pay off Debts
Ensure to pay off all your debts and stay out of debts for the rest of your life. Pay off your highest debts and gradually move to the next debts until all are paid off.
6. Emergency Fund
Have a fully funded emergency fund set aside for liquidity in case of an emergency, such as losing employment or an expensive accident. Set aside money in order to be ready for what may come your way unexpectedly. Begin by having 3-6 months of expenses kept in a savings account before investing.
7. Invest into Retirement
Begin saving for your retirement by investing fifteen percent of your gross income into retirement accounts such as Roth IRA and 401(k). 75% of millionaires who consistently invested over a long period succeeded in building their wealth.
Use this information to build your wealth, be patient and see how your finances increase over time.