Techniques For Building Wealth And Achieving Financial Freedom
Developing a financial plan is crucial for building wealth and achieving financial freedom. By creating a budget, investing, establishing an emergency fund, and managing debt, you can take control of your finances and work towards your long-term financial goals. Figure out what you want and align your actions to your goal. Create a strategy and maintain a long-term mindset.
These expert tips will help you increase your wealth and improve your finances.
Investing is essential
You can’t “save” yourself to wealth, you must invest. Many confuse investing money as a risky way to grow wealth. This is wrong.
Investing is essential to protect your money from the negative effects of inflation - your money in the bank is losing value everyday with inflation above 8%, you will lose half of the money in 10 years. The richest 10% of Americans own 90% of all the stocks, and the bottom 90% own 10% of all the stocks. By investing in income-generating assets, you can create a diversified portfolio that provides both growth and income potential. Cash flow + long-term wealth creation.
If your money isn’t making more money, it’s losing purchasing power every year. So, don't let fear of losses prevent you from investing - the biggest risk in investing is not taking any risk.
Opportunity Cost
When you’re making a purchase, consider the opportunity cost of the money you’re spending. If you make $20 an hour:
- That night out doesn’t cost you $300, it takes 15 hours of your time or 2 days of work,
- That car doesn’t cost $50,000, it takes 2,500 hours of your time or 357 days of work.
There’s nothing wrong with that, but always consider opportunity cost. When you fully understand the potential costs and benefits of each option you are considering, you can make more informed decisions and be better prepared for the consequences of your choices. Time is your most valuable asset. Don’t waste it.
Material wealth is not a sign of wealth
Don’t buy liabilities to look wealthy, buy assets to become wealthy. Invest in assets so that they replace your liabilities over time.
It’s not about how much you make, it’s about how much you save and invest.
Always consider opportunity cost. Avoid an escalating lifestyle. Just because you start earning more doesn't mean you have to spend more. Earning more money doesn't fix bad spending habits. Increasing your living expenses without increasing your income will cause costs to accrue in the long run.
Pay off and eliminate high interest debt
Eliminate high-interest debt to avoid delaying wealth creation and hindering your ability to invest in the future. Consumer debt takes away money earned today, leaving nothing for future investments.
Create an emergency fund
It's crucial for everyone to have quick access to cash. Set aside a reserve fund to cover living expenses for 3-6 months in case of a rainy day. Your best bet for an emergency fund is a high-yield savings account, which earns interest while the money remains.
Create multiple streams of income
Develop multiple streams of income through investing/side hustle/business work to increase your income. Multiplying your streams of income is not an option, it’s a must, you protect yourself against unexpected job loss. Achieve financial independence faster.
Budget & reduce expenses
Create a budget to track and reduce costs. It’s vital to have control over your spending and understand where your money goes. Get smarter and spend less than you earn. Prioritize important expenses by being more frugal and resourceful with money. The fastest way to increase your income is to Track Your Spending and reduce your expenses.
Invest for your retirement
Retirement isn’t an age, it’s a number in an investment account. Investing for 20 years can be hard, but getting old and going bankrupt is much harder. With a Roth IRA, capital gains or dividends are tax-free while your investments grow in your account, and withdrawals of funds after retirement are tax-free!
Invest in your education
As Jim Rohn said, “Formal education will make you a living; self education will make you a fortune.” Educate yourself on personal finance & investing, and your wealth will grow in abundance. The biggest benefits of financial literacy and financial education is financial freedom.
In today’s world you can learn how to do just about anything online for free. Almost everything compounds and grows exponentially over the long term. Investing in your career, relationships, networks, and assets may feel difficult at first, but your investments will pay off in the long term. To succeed, take responsibility for your actions and situation.
Being financially literate will change your life. So if you want to start investing, a side hustle, a business, or whatever else, go out and learn how! Stay seeking out the knowledge and you’ll find it.
Tiffany Lalremruati
