Building your wealth is often much easier said than done. Depending on who you ask, there are several methods and strategies to take into consideration.
Unfortunately, there is no clear blueprint you can follow to guarantee financial success. The option that is right for your finances largely depends on your overall goals, career and spending habits.
When you are building wealth, it is not only about saving money, but also creating financial stability so that you are comfortable setting a budget and other financial goals.
Paying off Loans
If you are unsure what your overall finance goals are and want to focus solely on saving money for the future, you can start with paying off your loans. Making the minimum payment on your loans is good, but paying more can help.
If you find yourself with a surplus of money each month, you can change your payment amount. While it may not seem like it makes a substantial difference, paying off loans faster prevents you from paying more in interest.
Depending on the loan, this could end up saving you hundreds or even thousands of dollars in the future. It is also a good way to improve your credit score, which can help you get even more favorable loan rates in the future.
Another way to prepare for the future is through investing. There are many categories you can invest in, but traditional investments focus primarily on bonds, real estate and equity shares.
When you purchase a bond, you are buying a portion of debt from either a corporation or government entity. You are effectively acting as a lender to these organizations.
In exchange for purchasing your debt, the organization pays you back at an agreed upon date, with interest.
Equity shares allow you to purchase stock in a business. The goal is to purchase equity at a lower rate for a business you expect to grow.
As the business grows, so does the value of your equity, allowing you to sell it later for a profit.
Real estate investments are much more straightforward. When you purchase real estate, you can either build or rent out the property, eventually selling it for a greater price than you paid.
In the past, alternative investments largely referred to investing in collectibles, such as art or automobiles. Today, it includes several other investments, including digital options like cryptocurrency and NFTs.
Many investors view these as high-risk, high-reward. There is a greater chance these items depreciate, but if you make a sound investment, your rate of return may be significantly higher than what you initially paid, taking less time to gain value compared to a traditional investment.
As with any investment, it is important to carefully research a collectible before you commit to investing in it.