When people think about wealth, they think of accumulated wealth over a long period of time that seems unattainable. Most people think it is based off of pure luck of winning the lottery or obtaining a large trust fund but becoming wealthy at younger age can be very doable.
Here are some ways that you can become wealthy:
Create a financial blueprint
Creating instructions for yourself can help you stay on track to becoming wealthy. Most people do not know where to begin thus a blueprint will outline exactly what you need to do to start and maintain your wealth. Also, establishing goals will give you something tangible to work towards and will allow you to see if you made your goal or missed it. Missing your goal by either the time or amount can help you figure out what you need to change from your plan in order to be successful.
For example, if you want to save $20,000 in 8 months and you save $15,000 in 8 months, you can reevaluate your blueprint and change things accordingly. The reverse can also happen where you save $32,000 in 8 months, continue doing what your doing and maybe do more of that!
Either way, establishing goals will serve as benchmarks and keep you on track with your savings and investing.
Invest
Investing is another way to have your money make money. Although there is some risk involved depending on what type of investment vehicle you choose, historically you can make money from investments. Smart investing can give you a better chance at making money. Read our Invest Smarter not Harder article to get more information on investing (https://www.northernpeakfinancial.com/blog/invest-smarter-not-harder).
Start a business
Passive income is huge when it comes to wanting to earn maximized profits. Think of it this way: there are only so many hours in the day for you to make a limited amount of money. If you start a business, you can have other people work for you and in essence if you manage the company right, you can make more money without doing all the work. If you have employees working for you, you can allocate your time somewhere else and earn more money. This way, you will have two sources generating income simultaneously. Who wouldn’t want to earn more money? Starting and managing a business can be a lot of work and many businesses fail, but if you get it off the ground, you can hire other people to lead the company.
Divide your assets
You don’t want to put all of your eggs in one basket right? Doing so will heighten your risk of losing money. For instance, if you put all your money into one company’s stock, there is a possibility that the company could go under and you lose your whole life’s savings. Similarly to stocks, you should consider diversifying your other investments as well. Having money in stocks or savings accounts are the most common places to keep your money. Aside from investing money into your new business if you open one, another investment is in real estate. With investment properties, you potentially can create a steady flow of income if you run the numbers correctly.
For this example, we will be conservative with our numbers. Let’s say you buy a house for $100,000. The down payment of 20% is $20,000. This assumes you only pay out of pocket $20,000 plus any closing fees. The home you bought is a two family and you are renting out each unit for $1,500 so that’s $3,000 a month. After all the payments (mortgage, savings for any sudden expenses, water bill) let’s say you pocket $300 per unit so $600 total a month. That’s $7,200 a year. If you save that money for 3 years and have $21,600 for another down payment on a house. All of your profits now double (assuming timely payment of rent and conditions are the same) to $1,200 a month. Now it only takes you less than a year to buy another house for $100,000.
The rents may pay for expenses and can earn you income. With that income, you can buy more properties. Look at it this way, in approximately 4.5 years, you could turn $20,000 into $300,000 if you buy three homes and these investments are earning income while you sleep.
Although investment properties are more complex than these basic numbers, broadly speaking, this is how rental properties work. Sometimes you have tenants who do not pay or repairs to the property that can take more money than you set aside. And this should be considered when assessing risk.
Decrease debt
Decreasing your debt can actually increase your savings. How does this work? The less debt you have, the less money is leaving your pocket. If you are not paying off the debt you do have on time, interest kicks in and you will owe more than the original amount. For tips on how to decrease debt, please read our article on debt (https://www.northernpeakfinancial.com/blog/paying-off-debt).
Take risks
Taking risks is the only way you will really be able to earn extra cash and become wealthy at a young age. You can put your money in a conservative investment vehicle like a savings account, CD, or money market account but they will not earn much money. Investing your money in riskier vehicles can give you a better chance of earning more. While your earnings are not guaranteed, historical data shows you can earn more. With risk there is often reward.
Moreover
Wealth is not guaranteed and not easy to get. You have to put in money in work in order to expect a return on your investment.
No strategy assures success or protects against loss.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.