Start Saving Early: The earlier you start saving, the more time your money has to grow through compounding. Try to start saving a portion of your income as soon as you start earning, even if it's just a small amount. As your income increases, you can gradually increase the amount you save.
The idea of early saving, comes from the wisdom idea that the earlier you start, preferably in childhood with a piggy bank, the more easily will one adopt a saving orientation.
Make a Budget: Develop a budget that takes into account your income and expenses, including fixed expenses (rent/mortgage, utilities, transportation) and discretionary expenses (entertainment, dining out, etc.). Make sure to allocate a portion of your income for savings and Investment.
The use of a budgeting app may be of help here in allowing you to have a visual image of your income and spending as you go along.
Mortgage: As a general rule of thumb, always buy something that you can live in, and secondly that attracts good rentals. There is a rule of thumb, not applicable everywhere, but useful. It says that the rental you earn, should be at the very least 1% of the cost of the property/mortgage.
So for instance if a property costs USD 50K, then the rent should be at least USD 500 per month. This rule assumes a 10 year payback of the mortgage through the rentals. This is a very powerful idea because, once you take up the mortgage, they repayments will be made by your tenants, and if you strict about your spending and keeping up mortgage repayments, you can literally enter into a new mortgage every 10 years.
The way to even more wealth, since it assumes that as times go by your income sources improve, one can choose to take up more than one mortgage at a time, for as long as you have a reasonable certainty that you will have tenants.
I have always found real estate as an asset class attractive since it can have significant upward revaluation opportunities. Remember however, in any real estate you decide to invest in, the other rule of thumb is that you should be willing and very happy to live there. If you would, then other people of your class and thinking, would. If you don't understand the nuanced thinking of somebody in a different class from yours, then don't attempt o invest for them.
Pay Off High-Interest Debt: High-interest debt, such as credit card debt, can quickly eat into your wealth-building efforts. Consider paying off debt before investing, as the interest you pay on debt can often be higher than the returns you would earn from investments.
Invest in a Retirement Account: Take advantage of retirement accounts such as a 401(k) or an IRA, which often offer tax benefits and the potential for higher returns. Try to contribute enough to take full advantage of any employer matching contributions. In countries outside the USA, the equivalent is contributions to a pension plan.
Diversify Investments: Diversifying investments is crucial to reducing risk and increasing the potential for returns. Consider a mix of stocks, bonds, and real estate investments to achieve a well-diversified portfolio.
We are taught that our risk appetite tends to fall the older we get. The problem is that where risk is lower, the returns are lower as well. The trick is to seek a balance, between you natural desire for better returns and opportunities that make sense.
Bernie Madoff and other such like Ponzi schemes fed off the desire for higher returns. Keep your eyes on your capital and accept what returns you get from well established institutions.
Consider Additional Investment Opportunities: In addition to retirement accounts, consider other investment opportunities, such as mutual funds, individual stocks, and real estate investment trusts (REITs). Do your research and understand the risks and rewards associated with each investment before making a decision.
Stay Disciplined: Building wealth over the long term requires discipline and patience. Avoid impulsive financial decisions and stick to your investment plan. Review your investments and make adjustments as necessary, but avoid making major changes based on short-term market fluctuations.
Seek Professional Advice: Consider seeking the advice of a financial advisor, especially if you are new to investing. A financial advisor can provide valuable insights and help you create a comprehensive wealth-building plan.
Regularly Monitor and Review: Regularly monitor and review your investments and financial plan to ensure you are on track to reach your goals. Consider hiring a professional to review your finances if you need additional support.
By following these steps, you can lay the foundation for a successful long-term wealth-building plan. It's important to remember that wealth building is a journey, and the key is to stay disciplined and focused on your goals over the long term.
Enjoy!
