Building up seven-figure wealth is a financial goal that many people share. A million or two in the bank brings a whole new level of financial freedom.
Here, I’m going to share my top ‘seven-figure wealth tips’ for 2021. These could help investors build up a fortune, no matter their income.
Pay off credit card debt
If someone’s goal is to generate serious wealth, my first money tip is to pay off all credit card debt. Average credit card interest rates in the UK are over 20%, meaning even small balances can attract a lot of interest. This kind of debt can really set someone back. Paying it off will put people in a much stronger position financially.
Pay yourself first
Next, make saving a priority. The best way to do this is to pay ourselves first every month. We don’t need to be concerned if we can only save a little every month. Small savings can turn into larger sums very quickly.
Protect our gains
Once we have some savings, we should think about putting them into an ISA to protect the gains from the taxman. My tip – don’t bother with a Cash ISA. These are pretty much useless in the current low-interest rate environment.
Instead, take a look at a Stocks and Shares ISA. With this ISA – which has an annual allowance of £20,000 – anyone can invest in all kinds of growth investments completely tax-free. I can’t stress enough how good this deal is. Make £50,000 of gains from investments in a year and investors won’t pay a penny in capital gains tax.
And those under 40, should take a look at the Lifetime ISA. This only has a £4,000 annual allowance, but it comes with 25% bonuses. Act quickly and invest £4,000 either side of the 5 April ISA deadline, and anyone could receive £2,000 in bonuses in the next few months.
Pick up pension tax relief
Saving into a pension is also a smart financial strategy. When we save into a pension, the government provides us with tax relief. This is essentially a reward for saving for retirement. Basic-rate taxpayers receive 20% relief, meaning a contribution of £800 is topped up to £1,000.
Don’t just save money… invest it!
Finally, we need to get our money working for us by investing it. This is the real key to building seven-figure wealth.
In my view, stocks are the best long-term investment. Over the long run, stocks tend to provide returns of about 7-10% per year. Earning this kind of return on our money means a seven-figure portfolio becomes a whole lot more achievable.
Thanks to advances in technology, investing in stocks has never been easier. Today, anyone can get exposure to the stock market easily within a Stocks and Shares/Lifetime ISA or Self-Invested Personal Pension (SIPP) by investing in funds, investment trusts, ETFs, or individual securities. Costs and charges have come right down in recent years, meaning even those with small amounts of money to invest can do so cost-effectively.
One last money tip. Don’t just invest in UK stocks. The UK has some great companies, but many of the world’s most successful companies are listed internationally. By adding international exposure to a portfolio, investors can open up a whole new world of exciting growth opportunities.
These kinds of opportunities could build a seven-figure portfolio a whole lot faster.
