How to Build Wealth: Strategies You Can Start Now
If the idea of building your wealth seems overwhelming and complicated, this is a post you need to read. The reality is that it doesn’t have to be at all and it’s something that’s within reach for anyone.
In simplest terms, wealth is your assets minus your debts. So, to build wealth, you need to focus on increasing your assets and reducing your debts. It really is that simple.
To get there, there are several things you can start doing right now to build wealth so you can live the life you want.
The Self-Subscription
It’s amazing how many subscription services there are in 2022. Data shows that U.S. users pay for four streaming services on average and 7% of Americans have six or more! And that’s before we account for all the other residual monthly costs we have. What if, instead of those 3 or 4 monthly service subscriptions, we subscribed to our own investment accounts? Simply put, if it wasn’t for retirement plans at work that automatically defer some of our salaries for us, the retirement crisis in this country would actually be far worse. Treating your investments as a monthly bill that your credit score depends on may be the first step to true financial freedom.
Live More Modestly
All too often, people have income increases and as a result, they immediately increase their spending. So even though you’re making plenty of money, you end up with little or no savings. Don’t fall into that trap. Spend less than you earn and make building wealth a top priority.
Live modestly and always pay attention to where your money is going. Make a list of everything you spend money on for an entire month, and then look for areas where you can cut back. You might have no idea how much you spend on things you don’t need until you see it all right in front of you.
Debt Control
The best way to get into a better financial situation is to have a handle on your debts. Although a number of financial personalities have championed paying off all debts, we think debt is one of the most important tools you can use to enhance your long-term wealth. If your secured debt (collateralized) is low interest, paying this over time will free up cash assets to invest elsewhere while earning a higher rate of return than the money you’d be saving by eliminating your cheap debt. Utilizing a healthy credit score to advantageously borrow cheap money is a far cry from the high-interest unsecured debt people should avoid at all costs. Little tricks like these shine a bright light on the many ways to utilize debt instead of eliminating almost all of it completely.
Make Your Money Work for You
Once you have funds available to invest, you can let your money grow over time thanks to compound growth. If your employer sponsors a retirement plan, take advantage of it. If the company provides matching contributions, allocate enough of your own money to get the full match. You should also be investing in taxable, and tax-free accounts to ensure maximum withdrawal flexibility later in life. Accounts like these will enable you to invest in accounts that allow access to your investments prior to age 59 ½ without having to pay penalties or ordinary income taxes. Having a diversified tax strategy is just as important as having a diversified portfolio.
Get Professional Help with Wealth Building
At Toomey Investment Management, we focus on keeping our portfolio costs low, as well as helping our clients understand how the investment process works. We have designed a series of models that we use to choose the right investments for each client’s goals. Contact us today to discuss how we can help you build wealth for the future.