7 Constructive Ways To Build Wealth With Financial Planning

Today we are feeling glad to have Amy Nickson as an article contributor. She graduated from Oglethorpe University, Atlanta, Georgia. She works as a financial writer and she shares her expertise through her crisp and well researched articles based on money management, money saving ideas, debt, and so on. You can check our her social media here!

 

7 Constructive ways to build wealth with financial planning

Building wealth is almost everyone’s dream. But to fulfil that dream, you need to follow some constructive steps. The steps to building wealth may seem simple but difficult to follow. Not all who promise to do it are able to make it possible. But, you need to be determined towards your dream.

Here are some steps that can help you boost your wealth. Similarly you can also make sure to not waste your hard earned money on useless stuff. Remember, the earlier you start following these steps, the sooner you’ll be able to see yourself as a wealthy person.

 

  1. Invest in your 401(k) account

According to the most financial experts, you must enrol into 401(K) account to secure your retirement. Most Americans forget to plan their retirement as they’re far busier with planning their vacations. As a financially responsible citizen, it is your duty to plan your retired life so that your finances do not go out of control after discontinuing the income.

Using your 401(k) account properly allows you to take advantages of tax benefits and your employer’s contribution. However, make sure you avoid early withdrawal penalty i.e. (10%). You must wait until age 59.5 to avoid the penalty.

 

  1. Look for mutual funds that you can afford and watch out the fees

Stick to investing in low-cost and no-load mutual funds that can help you gain huge returns on minimum investment. Clever investment can often be beneficial for those who are looking for ways to build wealth.

 

  1. There are no shortcuts to saving, keep doing it!

The best way to build wealth is by saving money religiously. Invest money in the safe investment vehicles but make sure you have enough funds available at your disposal to fight any financial emergency. Leading a frugal life is the ultimate secret when it comes to building wealth.

 

  1. Follow a simple investment portfolio

Follow a simple portfolio while investing. It will not expose you to too many financial risks. Try to choose 3-4 index funds to get favorable kind of exposure. The low-cost mutual funds and the ETFs give you choice to invest in asset classes. You need to diversify your portfolio to earn a good return.

 

  1. Don’t get confused while investing

Be always confident when it comes to investing money in various financial instruments. You need to start early to get better investment results. Remember, the type of financial instrument that you’re choosing and the age you’re starting off are very important.

For instance, a person who starts contributing $100 a month when he is 22 will earn more than a person who wants to be 32 to set aside $100 per month.

If their money grows at a rate of 8%, the first person will have $234,600 and the second person will get $177,400 (if they both retire at the age of 64). This proves the importance of investment at an early age to build wealth and address your financial obligations. So, make the decision wisely.

Questions that you should ask before investing

Before choosing an investment opportunity, it is important for an investor to ask a number of questions like:

  1. In what way will the various investments match your objectives and which is the best one for you?
  2. How easy it will be for you to sell off the investment?
  3. How much will it cost you to buy, hold and sell the item you are going to invest in?
  4. What are the returns that you can expect on the amount you had invested and when can you get back the money?
  5. From where can you get more information about investment?

 

  1. Invest in real estate

Real estate investment has always been one of the most popular modes of investment due to the number of benefits it offers. Real estate investment is as old as the practice of land ownership, where a person buys a property and then rents it out to another person, the tenant, to generate income. The renter is supposed to pay an agreed upon amount to the owner on a periodic basis.

According to the reports of the US Census clock, population is increasing every year. So, as per the rules of supply and demand, there is a constant need for housing. However, the demand for accommodation may not be the same every year as it depends on various factors.

 

  1. Get rid of high interest debt – your credit card debt

For most people, the best way to save money and build wealth is by repaying your high-interest rate debts, which are especially your credit card debts. As credit cards carry sky-high interest rates, you must make sure that you repay these debts as soon as possible, to save your credit score from being hurt. Use your saved money in paying off debts after calculating the debt amount through a credit card debt calculator.

 

Finally, if you are not in debt and doing great with finances, you can involve yourself in the attempt to build wealth. With some proper planning, you can definitely achieve your goal!

4 thoughts on “7 Constructive Ways To Build Wealth With Financial Planning

  1. Troy @ Market History

    I agree that investors should follow a simple portfolio strategy. Investors with 20, 30 different positions end up losing track of them all. It’s hard to make 20 or 30 good decisions. It’s much easier to make 2-3 good investment decisions.

    Reply
    1. T Post author

      Definitely. Sometimes it’s really much easier to focus on 2 to 3 investments because it is easier to focus and you have more time to study them. Always keep it simple!

      Reply
    1. T Post author

      I think Amy wrote these 7 steps without placing them in any order of importance. But it’s a great point! Any spare cash you have should be put towards paying off your credit card debt first, 20% interest rate per year is not a kind of debt you want for the long term.

      For me personally, I think most debt should be paid off before you begin investing. If you can pay off a debt that charges 6% interest a year, that is the same as getting a risk free 6% return on your money. However if the debt is 2% to 3% per year and you have the ability to consistently get higher returns(>3), then perhaps you need not rush to pay it off first.

      Of course, ultimately I think it’s up to each individual and what you’re comfortable. Some people just don’t want to be in debt, some are fine with a little “good debt”.

      Reply

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