The truth is, looking for tips to build wealth successfully can be quite overwhelming. There are so many articles, videos, and even ebooks that claim to hold the secret to building your personal net worth. While we are not saying that these are not true, it is a fact that filtering through all these information can be daunting. It will really tire you out. At least, if you ever attempt to find every information that will help you improve your financial situation.
But why is there so much hype about our net worth? When you have a six-figure income, doesn’t that automatically make you a financial success?
Not exactly. You should never let your income be the end-all and be-all of your financial position. Striving to earn a huge amount of money is okay – but only because it will help you increase your net worth. In the end, it is your net worth that you need to monitor. This is the money that you have after you remove all your debts and other financial liabilities.
Let us compare Person A who is earning minimum wage with no debt and $1,000 in their savings account with Person B who earns $100,000 a year and yet has a total debt of $150,000 with no savings. Who do you think is getting ahead? Person B has a negative net worth while Person A has $1,000. In the end, Person A is actually richer than the other.
3 rules to build wealth successfully
You need to shift your focus from your income into your net worth in order to build wealth successfully. The older you get, the higher your net worth should be. Current statistics reveal that the median net worth of Americans below the age of 35 is $4,138 (excluding home equity).
Obviously, young adults have a lot of work to do. While the median net worth improves as people age, it is nowhere near impressive figures. In fact, those entering into retirement (ages 65 to 69) only have a net worth of $193,833 ($66,168 without the home equity). If society does not change, a lot of us will be retiring with less than what we need to have a comfortable retirement.
The good news is, it is not impossible to build wealth successfully. In fact, you can forget about everything that you have read online. You only need to focus on three important rules to improve your personal net worth.
Rule 1: Stick to your job
Try to stick to one job for as long as you can. According to statistics, the total separations rate in the country is 3.5% – which is around 5.2 million. Usually, the longer you stay with the company, the more benefits you receive. If your employer offers a great retirement package, you should also take advantage of this as soon as you start working for them. There are companies that offer stability, career advancements, investment opportunities, etc. These are meant to encourage workers to stay loyal and keep turnovers low. The bottom line is, if you continue to work for the same company, you will get more in return. Whatever you receive can be used to help yourself build wealth successfully.
Of course, you do not want to stick to a job that is causing you a lot of stress. This is why you need to be clear about what type of career you want to pursue. Choose a job that you know you can stick with for the next few decades. If you think that is not your current job, you need to act quickly.
Rule 2: Control your credit situation
This does not mean you should never use debt. It is okay to use debt but make sure that you know how to manage it well. If you have a lot of debt right now, you need to come up with a strategy to get rid of the high balance. Focus on paying off high-interest debts. Once the level of your debts is okay, you need to be careful if you decide to use more. When applying for a loan, go for the one that offers the best payment terms and lowest interest rate. Not only that, you have to ensure that you can pay it back. If you need to use your credit card, limit your spending to an amount that you can pay back in full when the billing statement comes. That way, your payments will not be influenced by the high-interest rate of the card.
Rule 3: Invest your money
It is not just about investing. You have to aim for a diverse portfolio. There are so many places to put your money so it will help you build wealth successfully. You can invest in stocks, bonds, mutual funds, and financial markets. According to reports, the stock market increased the net worth of Americans to $98.7 trillion. If you have money in stocks, you are part of this growth. Your net worth increased too. If not, then you know that this is something that is worth your attention.
But that is not all, there are other places for you to invest in. You can buy assets that grow in value over time – like a house or jewelry (e.g. gold). Make sure you choose an investment that can help you reach your financial goals.
Different assets that can grow your net worth
When it comes to investing, you might want to consider the specific assets that you can use to help increase your net worth. Here are some of the things that are worth investing in if you want to build wealth successfully.
Your own house
This is still the American Dream. You want to own a house so you feel secure. Although you need to borrow money to buy a house, it is okay. Every payment that you put into your mortgage will be added to the equity of the house. That means you own more of the property – something that actually appreciates over time. This is a growing investment that you can rely on in the future.
Once you have successfully bought your first home, you can think about investing in other properties. Buy another property that you can rent out. This can be a great source of passive income for the future. A vacation house is another option – something that you can use from time to time or rent out for extra income.
Your knowledge and skills
Your education is also another thing that you should invest on. When you improve your knowledge and skills, you are increasing your earning potential. You can ask for a higher pay or you can endeavor in something that can help you earn more. For instance, learning a new skill that you can use as a side gig should be a great way to build wealth successfully. Not only that, being an expert in something can give you the right to demand a higher pay. The great thing about this is that it will never be taken away from you. A house, car, or other tangible assets can be taken from you through bankruptcy. But what you have in your head and capabilities you have learned will stay with you forever.
Your savings for the future
There are so many things to consider in this area. You have your retirement, college, down payment for the house, etc. You need to set a saving goal that will motivate you to put aside money. The savings that you will put aside can help make your future spending lighter. Not only that, it will also keep you from debt. Instead of borrowing money to help your kids get to college, you can help them by saving up for it. Since it is used for educational purposes, it is tax-free – even the earnings. If you save for a bigger down payment on the house you intend to buy, you do not need to borrow a huge mortgage.
This does not only beneficial because it protects you and your family. It is also one of the many assets that you can invest in so you can build wealth successfully. Some people hesitate to get a life insurance because they believe that it cannot be accessed unless something happens to them. This is not true. There are several types of insurance that you can invest in. Some can even be converted into a retirement plan once you reach a certain age. Try to figure out the type of protection you want to have and you should be able to find the right insurance to invest in.
This is another way to invest in yourself. With the high cost of health care, keeping yourself healthy is another way to cut back on spending. Whatever you save can be used to build wealth successfully. Not only that, your poor health can keep you from being productive and profitable. It can compromise your ability to earn money. You want to make sure that your health will not keep you from living a life that can fully enjoy the wealth that you are building.