Many people mistakenly take their income as wealth creation. However, the two are different. Your income is the money that you earn each month from your job or business. This is more or less a fixed figure that gets credited to your account for the work you do or the sales you make. When you take this money and invest it in other avenues to grow it over time, you are creating wealth.
Wealth creation constitutes a number of things like your assets, property, retirement accounts, inherited estate, gold and precious metals, etc. Putting your money in these instruments allows you to grow your financial worth over the years. The appreciation in the value of assets or the returns made from investing in stocks, bonds, mutual funds, etc., are all ways to create wealth.
8 Simple wealth creation strategies
1. Set the right Goals
The rich and wealthy people that you see and aspire to be are not always born with a silver spoon. But they do believe in setting the right goals. The first and foremost step to wealth creation is to set goals. Whether it is your retirement plan, estate plan, savings plan, or even an emergency fund, setting the right goal is the first step towards creating wealth. To ease the process, you can use a savings goals calculator.
2. Invest your Money
Famous American businessman, Robert G. Allen once quoted, “How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.”
Wealth creation is not about saving a certain part of your salary in your savings account each month. While having an emergency fund is important, it is also essential to invest some part of your income. 401 (k)s and Roth IRAs are a great way to invest your money. In fact, most companies meet some percentage of their employee’s contribution of 401 (k), making it a double benefit for your retirement. Investing in stocks and bonds can further increase your chances of generating more income. It is also important to start investing as early as you can in your career.
3. Maintain your Credit Score
Everyone is aware of the problems that come with debt, and yet people somehow can’t evade the debt trap. Having a debt not only takes you a few steps away from your financial goals each month, but also affects your credit score. Try to steer clear of the credit card debt cycle at the end of each month. Maintaining your credit score is essential to wealth creation as it can result in better interest on mortgage and loans.
4. Add another Source of Income
Having more than one source of income can significantly contribute to wealth creation and help you accomplish your financial goals sooner. Living in a virtual world has many benefits that the previous generations lacked. There are various websites that you can register on to take up freelance work. You can turn your hobby into a second source of income and earn on social media, blogs, or even set up a side business. You shouldn’t exhaust yourself or compromise with the quality of your life, but if you do have some extra time on hand, try finding some wealth creation strategies to generate more income.
5. Have a stable career
The high employee turnover rates are a clear indication of how people these days prefer to switch jobs multiple times in their careers. It is a good choice to move to a better paying job, as long as you make sure to not compromise on stability. Strive to keep a steady source of uninterrupted income and pension benefits. When you change jobs, study the company’s policy concerning 401 (k)s and look for benefits apart from the basic salary hike. It is advisable to always stick to a company that offers retirement benefits. Only quit your job if you have a new one at hand so you don’t dip into your emergency fund.
6. Diversify your Portfolio
Just like having multiple sources of income, having multiple investments is also one of the best wealth creation strategies you can follow. Diversification runs on the principle of not putting all your eggs in one basket. When planning out your portfolio, look at different avenues like, real estate, stocks, bonds, mutual funds, etc. Diversification reduces the risk of loss and can get huge returns.
7. Learn to Manage your Wealth
Wealth creation is not just about earning more money, it also about managing it well. A salary hike should not result in increased living expenses. Instead, it should result in increased savings and investments. With every salary hike, contribute a little to your living expenses, but save the rest for investments.
8. Invest in Real Estate
Real estate is a great way to increase the zeros in your net worth. Though they can be a little tricky, investments in the right kind of properties can contribute to great returns. Consult a professional realtor and invest in properties that can later be sold at higher interests. Real estate is a quicker way to increase your net worth than traditional wealth creation strategies.
To sum it up
Following these simple tips can be great for your net worth in the long run. Wealth creation is all about finding the right balance between traditional savings methods and taking calculated investment risks. The idea is to be consistent and cautious, and to incorporate the right wealth creation strategies.
