Here are 5 steps to growing your wealth. Many people struggle with their finances and never achieve the level of wealth and financial security that yearn for. Part of the problem is that, for many, they don’t know where to begin. This post is designed to give a blueprint to begin building wealth.
Are you following these 5 steps to growing your wealth?
1. Save Money
If you live below your means you’ll be able to save money and the decision to start saving a little money is the most important step on the road to financial freedom. Everyone’s heard the old saying that “money doesn’t grow on trees,” but did you know that it’s possible to grow money? All it takes is a little bit of savings and with the miracle of compounding you can sit back and watch it grow.
2. Pay Down Debt
Once you develop the important habit of saving some of your hard earned money, the next major step is to pay off all of your high interest debt. Things like credit cards, lines of credit, student loans, car loans – these usually carry higher interest costs so focus on eliminating these expenses first.
Saving money and paying off your debts are important first steps to becoming rich but to become rich you’ll need to take some measured risks by investing the money you save in things that appreciate in value. The average person has 2 major options for investing.
3. Buy Real Estate
Is real estate about to collapse in Canada? I’m not so sure but what I can say is that I’ve made a lot of money simply by owning my own home from a relatively young age. Many self-made millionaires made their fortunes by investing in real estate and it has been a great long-term investment. Real estate can be a powerful way to grow your wealth because it involves the use of leverage. But be careful not to over extend yourself.
4. Buy Stocks
While stocks can be volatile and risky, study after study has shown that owning a collection of them over long periods of time will result in superior returns. Two ways a person can gain exposure to the stock market are through buying low-cost index funds or by owning a bunch of dividend-paying stocks directly. Personally, I follow both approaches and have been quite happy with my results.
When you own appreciating assets like real estate and stocks you’ll find that, over time, your passive income will increase. With things like annual rent and dividend increases that passive income can increase quite significantly. This brings us to the final step in becoming wealthy.
5. Keep Increasing Your Savings and Investments
Every month my passive dividend income increases automatically because I’m continually investing my savings and re-investing the income generated by my investments. As your income from all sources grows, save and invest more of it. This will super charge your savings and get you to your goal a lot sooner.
There have been some super saver/investors who managed to retire early after 10 years of nose to the grind hard-core saving and by living a frugal life. Of course people will have varying degrees of commitment to a long-term goal such as early retirement or financial freedom but my point is that it is really important to continually increase your savings and investments. So my advice is to re-invest any dividend, interest, rent profit etc., and try to bank any raises or windfalls you receive.