Do you dream of having enough money to have more freedom in life, but are unsure of how to actually build wealth? Learning to accumulate 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 pay off debt (if necessary) and start building wealth.
Credit Sesame can help you keep track of your debt situation by giving you an at-a-glance picture of what you owe and to whom you owe it. Bonus: Credit Sesame will also share deals they come across that can help you lower the interest rates on your debts.
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. Start Investing
One of the best ways historically to build a nest egg is to invest in the stock market. A well diversified portfolio can make 8-12% per year depending on the investments.
It is important to beware of fees when choosing an investment firm as well. Hands-on financial advisors can charge a lot of money in fees, causing your investment profits to drop dramatically.
However, companies such as Ally Invest charge as little as $3.95 per trade, allowing you to invest for the purposes of building wealth without having to pay out thousands in advisor fees.
4. Identify your expenses
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 expenses into two categories: necessity expenses, such as food and housing, and non-necessity expenses, such as paying for TV and entertainment.
From there, decide which 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 401k’s 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. If you need a investment account, there are companies like Ally Invest that have really low trading fees to get you started.
6. Lower your expenses
This includes paying off debt as soon as possible, eliminating expenses that aren’t of value to your life and finding a way to spend as little as possible on things you absolutely have to buy. 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.
There is actually a free tool that can help you lower your expenses is called Trim. Trim automatically searches your debit and credit accounts for “grey charges” – you know, those payments you’re paying out each month or year that you have forgotten about?
Trim will find grey charges such as hidden magazine subscriptions or unused membership fees and cancel them for you absolutely free at your request.
Another way to reduce your expenses is by shopping around services you pay for every month like insurance. A site like Esurance can help you lower your insurance rates for you.
If you have debt you need to pay off – specifically student loan debt – Evoshare can help. Evoshare is an online shopping portal that partners with over 4,500 stores to save you money. When you shop through Evoshare, they earn an affiliate commission. The company then gives you 75% of that affiliate commission in the form of payment toward your student loan balances, helping you pay down your student loan debt faster.
7. Increase your savings rate
If you are looking to increase your savings rate, you may need to bring additional income into your home. Side hustles like taking surveys or starting a home-based service business can help. For instance, there are legit survey companies such as Survey Junkie that can help you earn money in your spare time just by taking quick surveys whenever you’ve got a few spare minutes.
You can also save money by using cash back companies such as Paribus. This is a cool tool, where they search all of your shopping purchases in order to get you a lower price – even after you’ve shopped.
By searching for sales that occur after you buy, searching for coupons you may have missed and searching for better deals through other websites, Paribus will collect and refund money that you could have saved on purchases you’ve already made.
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.
Which of these steps are you taking to secure your financial future?
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