Learning how to build wealth can seem difficult, especially if you come from a family without much financial know-how. But the truth is that the vast majority of millionaires are self-made, showing that it’s possible to build wealth from the ground up.
Educating yourself about money, managing your debt, and learning to save and invest are key aspects of building wealth. We take a look at a few questions to consider as you begin your journey.
How do I start building wealth?
According to Investopedia, the basics of building wealth are to make enough money, learn to save, and start investing. Simply put, this means you should make enough to cover all of your expenses plus something extra you can then put aside to save and invest.
While it’s essential to have a budget to make sure you’re not overspending, there’s a limit to how much you can eliminate from your life. If you’re still in the red after cutting expenses to a bare minimum, you simply need to earn more. You could do this by getting a second job, selling things you don’t use anymore, or working gigs like lawn maintenance or dog walking on the weekends.
Make it a goal to pay off debt. It’s hard to build wealth when you have debt accumulating up to 25% interest. Pay more than the minimum and send every extra penny to your debt so you can get rid of it as quickly as possible.
In addition to paying off debt, make sure you stop taking on more of it. Use your credit cards wisely (they do help build up your credit score) and pay them off in full at the end of the month if possible.
How do you create wealth from nothing?
It’s hard to build wealth if you don’t understand money or if you learned bad money habits from your parents. Either way, it’s important that you educate yourself about money.
Basic reading like Robert Kiyosaki’s Rich Dad, Poor Dad is a great place to start. Don’t discount podcasts, Instagram and financial education blogs as additional resources.
The earlier you start saving and investing, the more your money will grow. But it’s possible to build wealth even if you start in your 40s or later, as long as you invest your money well.
What is the fastest way to build wealth?
Author and millionaire Steve Siebold has studied the habits of self-made millionaires for years. He’s come to one basic conclusion during that time: Rich people have multiple streams of income.
This means not relying only on your day job to make money. You could also sell things on Etsy or eBay, petsit on weekends or teach online classes. Or you could use passive investments (like dividend-paying stocks) as a way to earn more.
Finding what you’re good at and taking advantage of it is key to success. Having more than one source of income also makes you ‘recession-proof’. Even if something happens and one stream dries up, you’ll still have money coming in from other places.
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