Want to Start Building Wealth? Here’s What You Need to Know
Wealth
Let’s face it: most people don’t build wealth just through their 9-5-day job. To build wealth, you need to invest your money strategically. As they say, “let your money work for you”
Before you can reap the benefits of investing, you need a foundation. That foundation is usually a stable income, and extra cash set aside. Whether you buy stocks or government bonds, you’ll yield a higher return on investment vs. leaving your money in a standard savings account.
Want to Start Building Wealth? Here’s What You Need to Know
WHAT DO YOU NEED TO START INVESTING?
You need two things before you start investing – money and guidance. Don’t throw your money into random stocks without proper research. And even if you have money, always make sure to maintain a savings account with six months of your living expenses.
As for guidance, you can do your own research on the internet, speak with friends, family, and colleagues, or hire a financial advisor.
HIRING A FINANCIAL ADVISOR: IS IT WORTH IT?
When it comes to hiring a financial advisor, it boils down to your preference. Nowadays, people turn to podcasts, forums, and social media networks to get their investing advice. However, hiring a financial advisor might be the best route if you don’t have enough time to research online.
Suppose you want on-call advice and someone to back up your decision. In that case, you should consider working with a financial advisor. Some people are not self-learners, and there’s nothing wrong with that. Keep in mind that financial advisors come at a price. On average, a financial advisor charges between $1,500 to $2,400 to create a financial plan for you.
SIMPLE STEPS TO BUILDING WEALTH
Albeit daunting at first, building wealth is not as hard as it seems. Before diving in headfirst, consider these simple steps to building wealth:
Want to Start Building Wealth? Here’s What You Need to Know
Credit: Photo by Karolina Grabowska from Pexels
FIGURE OUT WHAT WORKS BEST FOR YOU
Whether you’re investing alone or with the help of a financial advisor, you should always do your research. For example, if you’re about to invest $10,000 in stock, take a look at the company’s most recent 10Q.
Also, consider what your long-term goals are. Many investing plans consider your age. If you’re younger, financial advisors will suggest that you put most of your money in stock. In your 20s and 30s, you have a higher risk tolerance because you can recoup losses in the future. However, if you’re in your 40s and 50s, you’ll probably want to invest in low-risk investments, such as bonds.
ALWAYS CONSIDER INFLATION
You can easily find out the inflation rate in both the United States and Canada. If your investments yield less than the rate of inflation, you’re losing purchase power. For this reason, many financial experts advise again leaving large amounts of money in low-interest savings accounts.
If you want to learn how investing builds wealth, start by choosing investments that have a return on investment above the current inflation rate. Such a strategy might require you to pick riskier investments (stocks, mutual funds, etc.).
DON’T EXPECT TO GET RICH OVERNIGHT
Unless you get super lucky, you won’t get rich overnight from investing. Be it bonds, CDs, or stocks, investing takes time and strategic decision-making. Even if you follow the simple steps to building wealth, you may not see significant gains in the first year. Learning how to begin investing takes patience and an excellent financial advisor or research skills.
The idea of compounding investments is a significant component of building wealth. As you make money on investments, your gains will begin to generate additional profits. Consider a high-yield savings account that pays 5% interest. If interest compounds annually and you put $10,000 in the account, you will have $10,500 after the first year. After the second year, you will have $11,025.
HOW INVESTING BUILDS WEALTH
If done strategically, investing builds wealth because you may see year-over-year returns on your assets. It’s always possible to lose money, but the overall market has been trending upwards for quite a while. Your gains will accumulate and help you amass more money. If you’re wondering how to begin investing, it’s best to start small and do sufficient research beforehand.
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