Whether you are just starting or in transition, this is one of the most fundamental steps to building wealth.
Building wealth may seem impossible, but it is quite straightforward. From a financial standpoint, the term wealth is the number of valuable assets you own minus debt. It is not an overnight process or a get-rich-quick scheme.
To accumulate wealth there are 3 basic steps you need to need to take. Let’s look at each step.
1. Make Money
Whether you are just starting or in transition, this is one of the most fundamental steps to building wealth. A small amount of money that is regularly saved over time and allowed to compound will eventually grow into a substantial sum. There are two ways to make money: passive and earned income. A passive income is derived from investments, it requires little or no daily effort to maintain, while earned income is what you do for a living. Having multiple streams of income will help build wealth fast.
2. Save Money
Getting a high-paying job or having several side hustles without spending carefully and keeping track of where your money goes will end in a financial crash. You need to set a goal of a reasonable amount you want to achieve, you don’t have to live like a miser but make sure you stay dedicated and on track with your expenses. Cut out unnecessary spending that can affect your savings.
Break down your expenditures into mere wants and obvious needs. Have auto insurance if you own a car, health insurance, and life insurance if people are dependent on your income. When meeting up with a savings goal feel free to reward yourself.
3. Invest Money
Investments vary in terms of risk and potential return, while there are all kinds of investments, the basics that most people will like to start with are:
Stocks: it’s a form of security that indicates the holder has proportionate ownership in the issuing cooperation. Stocks are generally seen as riskier than bonds. Buying stocks through Exchange-Traded Fund is a transparent and risk-free investment.
Bond: it is a loan from an investor or borrower such as a company or government. When you buy a bond the issuer promise to pay the money back with interest after a certain period. There are five main types of bond, Treasury, savings, agency, municipal, and cooperate. Each type of bond has its own sellers, purpose, buyers, level of risk, and return. It is said that bond is less than stocks, but with less potential upside.
Mutual funds- it’s a combination of stocks and bonds. Mutual funds provide built-in diversification because they invest in many different securities. There are great achievements if you invest both in stock and bond funds.
Building wealth is not rocket science, it takes commitment, dedication, and discipline. It is important that before you embark on this journey, you equip yourself with a financial education that will make the seamless.
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