Everyone wants to be wealthy. Creating wealth is not just about status; it’s important for retirement and financial stability. The three elements on which to focus are wealth creation, debt management, and wealth preservation.
Many of us fail in the second and third parts. Ask yourself, how many times have you spent your money on expensive gadgets or branded clothes that you don’t even need?
There are many tips to creating wealth that no one talks about, but today I will share these secrets with you.
Invest Wisely
It’s not salaries, but investing, that creates wealth. In fact, the millionaires and billionaires in the world talk about investment more than anything else when it comes to growing their money. And they re-invest their earnings rather than spending them. But, here’s the thing: all types of investment have a certain amount of risk.
That’s why it’s important to weigh the pros and cons of any investment before you decide to put your money into it. Also, copy what wealthy people do — diversify your investments to create an investment portfolio, which is an array of investments in different areas to protect you from too much risk.
Never Depend on One Income Stream
Investors do two things that mere salary earners don’t do. First, they “make money while they sleep,” and second, they “make their money do the work” by investing their earnings in more investments. Similarly, you should focus on creating different sources of income that work for you in addition to what you may earn from your job.
There are a variety of ways you can do so:
* You can invest in the stock market (but remember, there’s definite risk associated with it)
* You can start your own online business
* You can work as a freelancer
* You can rent that empty room in your house
* And, the list goes on.
Save Money
With so many luxurious products available, saving money has become a difficult task. Follow these tips to save money to invest in creating wealth:
# Follow the 50/30/10/10 rule with your primary source of income. Spend 50% of your monthly income on your needs, save 30%, spend 10% on wants, and invest the remaining 10%.
# Follow the 70/20/10 rule with your secondary source of income (part-time business or money earned through rent, etc.) Re-Invest 70% of whatever you earn, save 20% for your future, and spend the remaining 10% on wants.
Creating Wealth Takes Time
No one creates wealth overnight. (Lottery winners get lucky; they don’t create wealth.) Wealth is created by diligent saving, investing, and budgeting over multiple decades.
Focus on Assets Before Liabilities
Buy assets before liabilities (such as luxury or unnecessary items).
Let’s use an example. Anna and Ryan. Both have $100,000.
Anna buys a house for $300,000, while Ryan purchases a luxury car for $300,000. Anna pays the principal and interest on her real estate loan from the rent she earns. Her property doesn’t cost her anything more every month because the rent covers those expenses. So, Anna can continue to save to make additional investments.
Ryan pays the principal and interest on his car from his primary income. He has little or no extra money available for savings and investments.
After completion of their loan periods, Anna owns the house (which maintains a stable value or may rise in value) while Ryan owns the car (whose value depletes with every passing day). At the end of the loan period, Anna could afford to buy the same vehicle Jack once bought, or for the same amount of money, she can buy another investment, such as a second house. What do you think she will do?
You can see who the winner is here – it’s Anna, who put her money into an investment rather than spending it on a consumer purchase (aka liability).
That’s why it’s essential to buy assets before liabilities.
I know you have the potential to create wealth. Now that you know the secret of how it works, it’s time to implement it.
Helpful Resource : Motivation for finance