5 Tips for Building Real, Sustainable Wealth
Everyone wants to be rich, yet few people are actually willing to put in the hard work and sacrifice that it takes to become wealthy. If you’re looking to build real, sustainable wealth, your best bet is to follow the plan that thousands of others have already executed.
5 Tried and True Wealth Building Principles
There is no singular path to wealth. There are, however, strong principles that have repeatedly been proven successful over the years. Feel free to go out and try your own unique strategy, but if you’re looking for the safest path forward – this is it.
1. Avoid Bad Debt
There are people who say all debt is bad – and they’re wrong.
There are people who say debt is the key to financial success – and they’re wrong, too.
The truth is somewhere in the middle. There’s good debt and there’s bad debt. You should strategically embrace the former and vehemently reject the latter.
Bad debt – which includes things like car loans and credit card debts – is stifling. It buries your finances, saddles you with high interest rates, kills your cash flow, and typically offers very little in return. (Bad debt is almost always married to a depreciating asset.) And if you don’t pay your bad debt down, it’ll ding your credit report and lower your chances of getting approved for things like mortgages and small business loans.
Avoid debt like the plague. If you already have bad debt, paying it off should be one of your biggest financial priorities.
2. Contribute to a Retirement Plan
Saving for retirement sounds boring to a lot of people, but it’s a proven wealth-building tactic. You might not notice much of a dent after one, three, or even five years – but wait until you’ve been investing for 25 or 30 years and the compounding interest really kicks in.
It’s especially wise to invest in a retirement plan if your employer offers a contribution match. This is free money and you should max out your contributions to take full advantage of it.
3. Leverage Real Estate
Once you have your feet under you and you’re successfully funneling money into retirement accounts that are backed by diversified index funds, take the time to learn more about real estate investing.
There’s a reason why so many wealthy people are engaged in real estate – it works. Real estate not only increases in value (theoretically), but it can also provide monthly cash flow. By steadily adding properties to your portfolio, you can build some significant wealth over time.
4. Pay Off Your Home
Speaking of real estate, you should try paying off your home as quickly as possible. Doing so will provide a significant boost to your cash flow, while also changing your entire mentality. (Your house feels different when it’s owned by you and not by the bank!)
According to LendingTree, the average monthly mortgage payment in the United States is $1,029. But if you live in a place like Washington D.C. ($1,784), California ($1,642), or New Jersey ($1,355) – you’re probably paying far more. Now consider what you could do with that extra cash every single month. Sure, you could spend it. But if you’re really interested in building wealth, you could invest it. Over time, this steady monthly investment will balloon to a massive number – or give you the financial resources needed to invest in other assets.
5. Start Your Own Business
Just like home ownership, starting a business is a quintessential staple of the American dream. The United States is called the land of opportunity and continues to be one of the friendliest countries in the world for small businesses. (At least for now.)
If you want to build real wealth – money that changes your family tree – you should start a business. That’s the key to financial independence and success. A large percentage of wealthy people follow this path.
Are You on the Right Track?
The sooner you get your finances pointed in the right direction the better off you’ll be. People who start contributing to retirement and avoid debt while in their 20s are much more likely to experience success later in life.
Already in your 30s, 40s, or beyond? Don’t worry – you can still come out ahead. You’ll just have to be more focused and aggressive in your approach. Now’s the time to adjust your course and plan your attack!
Disclaimer: The writer is not an expert in the field and these suggestions should be followed at the discretion of the reader.