I know we often hear people speak about money and wealth on social media as if its just one small task that you have to do for one time and than BAM, suddenly you have all this extra income just streaming into your bank account. But, the truth of the matter is it isn't so simple and it actually takes hard work.
That's because we're not talking about making extra money we're talking about building wealth. Which is something most people don't know how to do. What I mean when I say wealth building is creating a foundation for financial longevity. You want all of your finances to be in perfect health and able to handle any unexpected expenses like injuries or car repairs. Luckily for you, I took all the guest work out for you and consolidated a list of 6 of the top wealth building tips.
Read on to learn how to start building wealth today.
6 Money Tips You Need to Know
1.) Turn your money into hard assets
Like the ever rotating door of your closet the market is accustomed to changes and shifts so something like inflation, will happen and is currently happening. How do you stop your hard earned cash from losing its value?
Let's talk a little bit about inflation first. Inflation means when prices of goods and services go up each unit of currency buys fewer goods and services and the result is depletion in buying power, in other words when $80 use to get you a boat load of items at the grocery store it now gets you only a few.
The number one way to keep the value of your cash is to turn it into an asset. An asset is a resource that can be used for economic value, the asset represents a value that can be exchanged into cash. You read that right, an asset can literally be anything that has a value that others would buy. The key word here is ownership, do you own a car? designer goods? Legos? All of these things(depending on condition)will do nothing but appreciate over time and that means the value is going up, and when that happens that means a higher return on investment, or more money in your pocket. Look around your home you'd be surprised how many valuables you might have that others are willing to pay for.
2.) Don't buy a house just to live in it
Huh? isn't that the point and the reason why I'm working over 40+hrs a week? I know, I had the same reaction. The purpose of buying a home is not to have a home but to have extra income. The worst thing you could do is buy a house and just sit on it, live in it, and keep plugging more money into it via mortgage, maintenance, bills without making any income from it. The name of the game is wealth building and you're not going to do it by just simply owning a house you need to leverage it. When I say leverage I mean use it to your advantage.
I'm sure you've seen those home improvement shows where they go and take a small little shack of a home and turn it into a desirable Instragamable palace, ever wonder why there are so many different home improvement shows with basically the same concept? That's because there is big business in home improvement.
I say this to remind you of your options and the cold hard truth is, houses are expensive. Wouldn't you want to buy a home with as much extra income as possible? The answer is yes.
Life hack: instead of buying a home just to live in it and have the property depreciate buy for an investment purpose and live in it. Why not have it all.
3.) Emergency Fund
I really hope this point is obvious because it's the most important. You won't go far in this life if you don't have an emergency fund. An emergency fund is suppose to be your "hands off" account that you use only in yes, you guessed it - An emergency. Now you can also use this fund for anything but the point is to have an emergency fund that you're funding weekly or monthly, whichever you can afford and don't take any of the money out until you hit your goal.
Preferably, keep your emergency fund in a High-Yield-Account(HYSA) that way you're growing your money faster than a traditional savings account.
4.) Multiple Streams of Income
I know, hustle culture is toxic. But the truth of the matter is, unless you're making $100k a year one job is not going to cut it anymore. I'm not saying you need two booming separate careers to survive in this world, just if you want a little more flexibility with your lifestyle starting a side hustle can be beneficial. Often times, peoples side jobs becomes their full time job, how cool would that be?
You can make extra money doing all kinds of odd jobs to name a few: sell candles, start an Etsy shop, join the GigEconomy(Adia app, Instacart, Fiverr), teach English online, sell your clothes(Poshmark, Mercari), Amazon Flex.
When trying to figure out the best way to earn extra income choose something that makes sense for your lifestyle. If you're an artist try putting your art on Etsy or selling it at a flea market- Whatever avenue you chose make sure you genuinely are interested in it or you won't make any money doing it.
Now that you've made some extra income it's time to make that money work for YOU! And investing is a great way to do this. Because the only way to build true wealth is by making money in your sleep and one way to do this is by having a diverse portfolio. Investing is similar to the saying we all know "don't put all your eggs in one basket" - Just like when hunting for a job you wouldn't put all your hope on one job, would you? Nope. Investing is the same way, diversifying your portfolio is an easy way to increase your odds for success.
Now, I'm not a financial advisor but I will say I follow the 90/10. The same strategy that Warren Buffett uses himself. Basically, you're suppose to invest 90% into stock index funds(SP 500) and 10% into government bonds(low risk).
6. Live Within Your Means
If you want to truly become a master of your finances you must be able to practice self-discipline. Meaning, you don't go and blow your entire check on things you don't need. Instead of buying yourself Starbucks coffee every day you make your own at home. Living within your means is about putting yourself on a budget and sticking to it no matter what new gadget just hit the market. It's about understanding how important it is to secure your future now rather than later. Finically literate people are always looking to score a deal, never pay full price, and always matching their investment accounts.
The road to wealth is not a road at all, it's a lifestyle. One that you have to work at everyday and keep a strong mindset because it won't always be easy. Remember, having a money making hobby doesn't have to be a bad thing, assets = money, and your budget is your best friend. Your future self will thank you.
- The Guilty Woman