Whether you are married with a family, or single and planning to stay that way, one of the most important things to an individual is their ability to have financial independence and leave behind a legacy.
Some people are able to do this by being sheer geniuses, others through being at the right place at the right time.
However, we can’t all expect to get so lucky, and the best approach to building wealth in the here and now is through a minimalist lifestyle and employing diversification to build wealth.
To begin, you should first become highly aware of what exactly you are spending money on. We have to remember that in order to build wealth, we have to find the patience to not spend now and to find cheap alternatives (sometimes just outright learning to go without) or becoming able to do things ourselves just to save that extra buck.
Once you start looking, you’ll find ways in which you’re wasting cash all over the place, from the water and the electric bill, or maybe even food and gas expenses.
A great idea is to write down everything you buy every day for a month, and then track them all into categories before adding up your monthly income. You should then hope to drive down spending on things that aren’t needs and increase income in order to save at least 20% of your income a month.
The goal is to save up to six months worth of income as an emergency fund, after which the goal becomes growing your capital as much as possible.
Some might be thinking, “but I can’t cut many expenses to reach that 20% mark!” Well, this is true for a lot of people (especially those starting out) and the only recommendations that will help is you have to either find a better job (easier said than done,) find a part-time job and work it into your schedule (again, not as easy as it sounds) or come up with a side gig to give you a steady cash flow. Even if it’s just a small amount extra, everything helps.
A dozen small income generating side hustles can be a salary on its own. One of the most popular things to do today is to start a blog, but the limit is little more than your imagination.
Saving isn’t everything, of course. You need to ensure your money is growing at all times, which is best done through passive investment. A lot of people opt for index funds. If you know much about the market, you’ll know that they can’t be beat through active investing.
Another way of investing money is through bonds (corporate and state-backed), although a lot of people tend to own a mix of index funds and stocks and bonds that over time generate a lot of money. Which brings us to our next topic: compound interest. When you first look into investing, a lot of the returns don’t look too good: 8% of the couple of hundred dollars a month most people are able to put into that market just seems like a few bucks in the eyes of people who need every dollar now.
What these people don’t understand is that next year you’ll be getting 8% of that growth (and so on and so forth) and every dollar you put in the market helps that percentage to be more and more.
Even someone working a minimum wage job, saving 20% could end up with hundreds of thousands of dollars over a two-decade period. With that wealth, you can begin to slow down earning and begin to withdraw a steady rate a year while your capital continues to grow, giving you total financial independence and retirement. And remember, the more you save and invest, the quicker you’ll be able to hit that early retirement.
To finalize, building wealth isn’t the scary and near impossible task that so many think it is. The financial markets are set up to propel growth and all that is missing from most people’s path to retirement is a clear understanding of the goals they actually need to achieve.
While it basically comes down to “cut spending, increase income” the ways of doing this are so numerous a single article could never begin to cover even a percentage of them. We hope that you’ll come up with a great way to increase income while becoming comfortable with spending less to save for the life you really want!