There is no one way to increase your net worth. Instead, building wealth involves a series of moves that you will make over the years with the goal of increasing your assets.
If you are successful, you will have much more freedom and flexibility in your life, including the ability to retire a little earlier and to pass money down to your children. It all starts with good financial habits. Here are six of them that can help get you to a better financial future.
Monetizing your spare time has become even easier in the gig economy. U.S. News & World Report advises that a second job can help you build wealth and save for retirement.
You can even work a little at a time in order to monetize your free time. Even taking a little bit of your leisure time and turning into money can make a big difference. You can take the extra money and invest it or move it into your IRA. This will give you more financial flexibility and freedom.
Build Wealth Incrementally
One of the most important ways to build your wealth is to do it slowly. You should make it part of your habits to cut expenses and save just a little bit at a time. Being methodical and disciplined about building wealth will keep your net worth headed in the right direction.
It is when you try to get rich quick that you can end up making poor decisions that leave you vulnerable to eroding your wealth and putting yourself into debt. Even cutting and saving a few dollars at a time will add up in the long run when you invest it and earn money on your savings.
You may be familiar with the process known as compounding. Investopedia defines it as the ability of your assets to generate their own earnings over time when they are invested and reinvested.
When you invest and remain disciplined, your money can grow much faster that just sitting idle in a low-interest savings or checking account.
Investopedia details that the annualized return of the S&P 500 Index since its inception in 1926 is between 10-11% annually. If you were to invest one dollar and receive this type of annual return, it would grow almost sevenfold over 20 years. Simply earning money is not enough to build your own wealth. You need to grow your money over time, and investing is the way that you would do that.
Some people may be afraid of making their own investment choices. Thankfully, here at Truliant, there are licensed professionals, available through CUSO Financial Services, L.P.*, who are able to help you with financial and investment advice so you can have confidence that you are making the right decisions.
Pay Off Debt
Debt hampers your efforts to build wealth. The usual net worth calculation is assets minus liabilities, so reducing your debt increases your net worth.
Depending on the type of debt that you are carrying, the interest rate could be much higher than the rate of return that you could earn on your money. In fact, the average interest rate on a new credit card runs approximately 19%. Paying out this type of interest will be a roadblock to you building wealth.
When you pay off debts, find the one with the highest interest, and try to eliminate it first. This will help you in multiple ways. The interest that you save can be used to pay off even more debt. Eventually you will become debt-free. This is incredibly important because debt is one half of the net worth equation.
Hire Professional Help
Building wealth is not always something that you are able to do on your own without a plan. For many people, this is not within their areas of expertise.
Truliant is available to help with basic financial guidance to get you on the right path, or you can meet with our CFS advisors for a more robust investment plan. At Truliant, our professionals are able to give you the advice that you need in order to grow your wealth and build your financial future. Call us today to find out how we can help you.
Stated simply, there is no building wealth without saving as the building block. Wealth starts with having a little bit extra left over each month to work with in growing your assets.
Saving money starts with budgeting and discipline. It is vital to plan out your expenses in advance each month to the extent that you are able. You should adopt a saving mentality that instills in you the goal of being able to put money aside from what you are making each month. Therefore, your budget should have a cushion built into it.
Becoming a saver is a practice that should be continuous. We recognize that there are times that life will not allow you to save and may even require you to tap into your reserves. However, saving will not only make it possible to have those reserves, but it will also keep you from going into debt when you have to tap into your emergency funds.
https://www.investopedia.com/terms/c/compoundinterest.asp https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp https://money.usnews.com/money/blogs/on-retirement/articles/2016-09-14/getting-a-second-job-to-save-for-retirement https://wallethub.com/edu/cc/average-credit-card-interest-rate/50841/
*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA / SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. The Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.