Do you dream of having enough money to have more freedom in life, but are unsure of how to actually build wealth? Learning to build wealth does take time, but it isn’t difficult. The road to financial independence is much more about perseverance than it is about money. The news media occasionally shares stories about the janitor, bookkeeper or other so-called “low-income” employee that retired as a millionaire. How are those with mediocre incomes able to retire with such large bank accounts? By following some simple steps that can help anybody build wealth. Here are eight steps that you can take to get on the road to financial freedom and start building some serious wealth.
1. Assess your situation
You can’t get to where you want to go if you don’t know where you’re at. Take a couple of hours and get a clear picture of your liabilities, your assets and your net worth. From there, you can work to devise a plan to dump debt (if necessary) and start building wealth.
2. Determine how much money you need to be financially independent
Work to figure out what financial freedom means to you. Determine how much money you need to live on each month, and for how many years you want to be able to live without having income. In order to accurately determine the amount of money you’ll need, you should have a successful working budget that details how much you spend each month for necessities and non-necessities alike. Don’t have a budget? Take the time to make one.
3. Consider meeting with a financial advisor
A financial advisor can help you determine what the best way is for you to reach your financial goals. Meet with an advisor that can share the different facets of building wealth with you, but don’t sign on the dotted line until you’ve done some more research on your own and met with other advisors as well so that you can make a well-informed decision before you hire someone else to help you manage and grow your nest egg.
4. Identify your value-based expenditures
After you’ve determined how much money you need to live on each month, you might be convinced that financial freedom is a non-option for you, but don’t panic. It’s time to divide your monthly expenditures into two categories: necessity expenditures, such as food and housing, and non-necessity expenditures, such as pay TV and monies for entertainment. From there, decide which expenditures or purchases truly bring value to your life, and which purchases might better benefit you if they were eliminated and that money was put toward your dream of financial freedom. Choose to keep value-based expenditures and eliminate non-value-based expenditures, putting that extra money to work in helping you build wealth.
5. Educate yourself on investment options
There are many types of investment choices that can help you build wealth and work toward financial freedom. It’s up to you to determine which investment vehicles you’ll use to build wealth. If you don’t plan on retiring early, you might want to focus on retirement investments such as 401ks and IRAs. If your goal is to retire early, other types of investments, such as real estate investments, may be a better choice for you. Utilize your local library and scour the Internet for investment experts that can show you what risks are involved with each type of investment. From there determine which investment types best suit your needs and your individual wealth-building goals.
6. Lower expenses and increase your savings rate
This includes dumping debt as soon as possible, eliminating expenses that aren’t of value to your life and formulating a plan to attain the highest savings rate possible. The less money you spend now, the more money you’ll have to put toward financial independence, leaving you more choices for what you’ll do with your life after financial freedom arrives.
7. Formulate a concrete plan
Once you’ve completed the above steps, it’s time to formulate a concrete plan with realistic goals for reaching your wealth-building summit. You can formulate your goals and your plans with the help of the financial advisor you’ve chosen, or go it on your own, but either way it’s important to assess those goals every six months and make modifications where necessary. Goals change, and so do the things we want out of life, therefore it’s wise to reevaluate your wealth-building plans to make sure your road map to wealth hasn’t gotten out of alignment with your dreams and how you want to get there.
8. Persevere in your plan to build wealth
This is likely the toughest step to building wealth and reaching financial freedom. Once you’ve formulated a concrete plan, you’ll begin doing the grunge work, so to speak: the taking of the daily, weekly and monthly small steps that will help you reach your end goal of financial freedom. Perseverance is one of the most difficult, yet rewarding part of reaching any goal. Choose to persevere in your plan to build wealth, knowing that all of those little steps will eventually bring you to the financial freedom finish line.
A life with the financial freedom might seem like an impossible dream, but with a great plan and some perseverance, you can build wealth and reach financial independence.
Do you have a dream of reaching financial independence? What steps are you taking to get there? What’s your best wealth-building tip?