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7 Foolproof Steps For Building Wealth
Create an Emergency Fund
Create an emergency fund to avoid the need to turn to debt.
Think about what makes sense for your financial situation.
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Create a Spending Plan
Know your income, your expenses, how much is earmarked for additional expenses and how much for other financial goals.
Spend Wisely
Learn how to spend on the things that matter to you.
Consider your values and priorities when you draw up your spending plan. If going on vacation or giving to a charity is important to you, include those items in your spending plan.
Pay Off High-Interest Debt
Pay down your high-interest debt as quickly as possible.
While some types of low-interest or tax-deductible debt can help you along the way, high-interest debt rarely has a good purpose.
Earn More Money
Building wealth is about cutting costs as well as looking for ways to earn more money.
- If you work for a company, make yourself valuable so you’re eligible for raises and promotions.
- Alternatively, look for a new job that pays more and recognizes your worth.
- Start a business or side hustle to make more money.
Invest
Compounding returns that come with investing are necessary to build substantial wealth over time.
Protect Your Assets with Insurance
The right insurance coverage can reduce your financial risk that might go toward replacing losses. For instance, homeowners insurance, health insurance, disability insurance, car insurance.
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Increase Your Income
Formal education, practical experience in your field and doing a good job is important to earn a high income.
Most professionals see their incomes increase over time. If you can gain high ear...
Save and Invest
You’ll only build wealth if you save a reasonable percentage of those earnings.
- If your employer offers a 401(k) plan, increase your contribution.
- Automatically send a portion of your money to your savings or investment accounts before you can spend it.
- Purchase a home instead of renting. You'll get your house payments back in the form of equity.
- Pay off anything you owe to avoid paying interest.
- Maximize the interest earned on your savings.
Cut Wasteful Spending
Periodically evaluate your spending and look for sources of savings.
- Invest in more sustainable technology for your home. For instance, if you watch cable, buy only the channels you are watching.
- Improve the insulation of your home to reduce the amount you are spending on electricity and gas.
- Consider buying in bulk.
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To accumulate wealth...
- You need to make it. You need a long-term source of income that's enough to cover your basics.
- You need to save it. You need t...
Making Enough Earned Money
Earned income comes from what you "do for a living."
- Consider what you enjoy as you will be more likely to succeed financially.
- Consider what you're good at and see how you can use those talents to earn a living.
- Consider what will meet your financial expectations.
- Consider how to get there. Determine the education requirements, etc.
Evaluate your income situation annually.
Saving Enough of It
To ensure that you save enough money, your wants should not exceed your budget.
- Track your spending for at least a month.
- Trim the fat. Break down your wants and needs.
- Adjust according to your changing needs.
- Build your cushion. Aim to save around three to six months' worth of living expenses.
- Contribute to a retirement fund and try to get the maximum your employer is matching.
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How you can invest in yourself
The foundation for every personal pursuit in life is to invest in yourself. It can take years. How you can do it:
- Learn to build something. If you can create something valuable w...
Income generation
Once you have ideas, you want to put your ideas to work. If you do that, you can start creating value. When we create value, we generate income.
During the pandemic for example, most restaurant owners had to focus on other ideas to generate income. Building wealth is not easy. We need a constant supply of ideas.
Asset investing
It is anything that will increase your wealth without personal labor.
- Businesses. This is a broad asset class. You can buy dividend-stocks on the market, and then the companies will pay you a share of the profit. You can start your own business. You can buy into other private businesses.
- Bonds. When you invest in bonds, you collect interest just like your bank is collecting on a mortgage.
- Books. A good book will generate cash for a long time.
Assets that don't generate cash, but might increase in value.
- Land. A piece of land generates cash when you rent or lease it.
- Collectibles such as art or watches.
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