Looking at your current financial situation vis-à-vis the goals you hope to achieve, you may feel a sense of despair. When will I ever accumulate enough money to finance my dreams, you may ask? You will be delighted to hear that increasing your wealth is not mission impossible – tens of millions of Americans have a net worth of more than a million dollars.
There are many ways to build up your wealth but most millionaires have done it the hard, honest way- sacrificing instant gratification to increase their savings and investment. If you ask them, they will tell you it took years of such self-denial to enjoy their current status. Here are some of the measures they probably will have taken to get to where they are:
- Start Investing
One of the misconceptions that hold people back from investing is that you need a huge sack of money to get started. While some forms of investment require a high initial outlay, there are investment vehicles that allow you to start small.
Besides the amount of money you are able to spare for investment, you need to consider your risk appetite as you weigh your investment options. One of the more popular investment vehicles currently is cryptocurrency. You have probably heard of someone who made millions as the value of Bitcoin shot by thousands of dollars. However, there are many others who lost big time when their crypto tanked or worse, wound up being a scam.
Real estate, bonds, and the stock market are the more trusted traditional investment avenues. Each of these still contains an element of risk, but probably not as great as the highly volatile cryptocurrency. Experts advise slowly building your investment portfolio by diversifying your investment options as widely as you can.
- Credit Score
Acquiring an asset is one of the ways you can increase your net worth. Buying or building your own home will not only free your paycheck from the landlord but will also give you a highly valuable asset. Houses and landed property are known to appreciate in value consistently, unlike assets like vehicles, which steadily depreciate after purchase.
If you’re like most middle-class Americans, you likely won’t have a hundred thousand dollars lying in an account somewhere you can just withdraw and buy a house. You will most probably approach your bank for a mortgage. If your credit score is poor, you will either have your application rejected or get your mortgage at a higher-than-normal interest rate.
This is because your lender will view you as a high-risk customer. So if you plan to become a homeowner in the future, you need to begin working on your credit history now. You also need to begin saving up diligently as most lenders will not provide 100 percent financing on your mortgage. You will be required to pay a percentage of the price of the home.
If you won’t have saved up enough by then you may think of applying for a secured loan or a payday loan alternative.
- Emergency Plan
You may be well on your way to hitting your financial goals when, out of the blue, disaster strikes. A loved one contracts a disease that the medical scheme doesn’t cover and you’re called on to help cover medical bills running into thousands of dollars.
As much as we can’t plan for every eventuality in life, we can give ourselves a bit of a financial buffer for when emergencies arise. You could do this the traditional way by opening a savings account for a rainy day. Or you could buy into life insurance or one of the other insurance policies that cover such emergencies. This way, when a cash-intensive event occurs, you don’t have to deplete your wealth.
- Reduce Debts
Debts eat away at your income every payday, preventing you from obtaining your financial goals. There are many ways you can work on reducing your debt burden. If you have access to a windfall, you can commit it to reducing your debt. You can also engage a financial company for debt consolidation services.
If yours is credit card debt, changing your spending habits can help you reduce your dependence on credit cards, freeing you from debt.
- Spending Discipline
There are two key ways to build wealth. Besides investing, acquiring assets, and adding to your revenue streams, you can reduce your expenditure. Look at your budget and ask yourself some hard questions. Do you really have to eat out every day? You will be surprised at how much you can save simply by packing your lunch instead of buying it daily.
Making smarter decisions when making purchases can see you save tons of cash. If you need to buy a car, why not go for a more practical, fuel-efficient option than a flashy guzzler with hefty insurance premiums?
Time and Effort
Building significant wealth, even becoming a millionaire, is very possible. But it will not happen overnight and it will not be painless. You may have to make difficult adjustments to your lifestyle and be patient as your decisions bear fruit.