How To Build Your Wealth Starts With These Seven Tools

In 2025, people will resolve to improve their lives. How they’ll achieve that is anybody’s guess, and most will abandon their resolution by February. A few will make good on their resolution.

Hopefully, if you resolve to do better financially, you’re prepared to do the work and change your approach. People making resolutions to improve know they aren’t doing well, but improving requires change. Financial change is simple to dream about, but without knowing what you’re improving, it becomes hard to make happen.

Here are some simple truths about securing your financial future that often go unused:

1. Start as early as possible. One of the best tools for building wealth is compound interest. The earlier you start saving and investing the more your money will grow. If you put just $200 a month away between age 25 and 65, at an 8% annual return, you could have $700,000 at retirement. The later you start the more you have to put away each month to get the same return.
2. Live below your means. This one is tough. We all want things and usually, it’s more than we can afford. But one of the cornerstones of building wealth is to live below your means. Avoiding what’s called lifestyle inflation, that tendency to spend more than you earn leaves you with something extra to put toward savings, investments, or paying off debt. That’s how wealth is built. But it requires sacrifice.
3. Diversify your income streams. It’s dangerous to rely on a single source of income. Building multiple income streams is important to building wealth. This is done through side hustles, rental properties, royalties, and dividends from different investments. It’ll help provide financial stability and security and speed up wealth creation.
4. Be consistent with investments and invest wisely. Investment is a crucial component of growing wealth. Whether it’s in the form of stocks, bonds, real estate, or mutual funds, regular contributions into investment accounts yield significant returns over time.
5. Be educated about finances. Financial literacy is something many in their middle years wish was taught in schools. It’s essential for managing money. Understanding things such as budgeting, interest rates, and where to place assets makes it easier to make informed decisions. The more educated you are, the less likely you are to fall prey to predators or bad ideas.
6. Avoid and get rid of high-interest debt. High-interest debts, such as credit card balances, drain your resources and slow the wealth-building process. Prioritize paying off high-interest debts and change your habits to prevent future debt accumulation.
7. Have clear goals and be disciplined. Building wealth requires a clear vision of what you want to achieve and the discipline to stick to your plans. Breaking up goals into smaller, actionable steps, is helpful and you can easily track your progress. Adjust your strategies if needed, but remain focused on the result.

Final Thoughts

If you’re not studying wealth you fall into one of two categories. You’re either comfortable, or you don’t think it’s doable

For those who are looking for ways to build wealth the seven pointers above are well-known and agreed upon.

Building wealth is a long game. Try starting with small amounts. Use what you can safely give up, and develop that.

Do you have any other tips you use? Why not share them in the comments and let us know?

Happy holidays and happy near year to you all.

References:

How To Build Wealth/Forbes/By E. Napolotano/Jul 30, 2024

How to Build Wealth When You Don’t Come From Money/Harvard Business Review/By Anne-Lyse Wealth/March 17, 2022