How To Build Wealth: Finding a Process That Works for You

The secret of how to build wealth is not really all that difficult. It comes down to putting a process in place that meets the stage of life you’re in and adjusting it as you go forward.

What is Wealth Building?

The idea of wealth building is to generate income over time in a multitude of ways. It covers more than income to include savings, investments, etc. How to build wealth comes down to personal circumstances. The best way to get started in building your wealth is to have a solid financial plan and gear it towards your future goals. There are different paths you can take to build your wealth. It largely depends on what you want to accomplish and what tools you decide to get there.

4 Steps to Building Wealth

Understanding the different ways that you can make wealth is key to creating your own plan to build your wealth. Here are four steps you can use to build up your wealth.

Budget/Spending Plan

Having a plan for your money is essential. And that is where budgeting comes in, which is just another word for a spending plan. Without a realistic spending plan, you won’t be able to cultivate wealth. To build wealth, you’ll need to clearly understand what you earn and how much you need to spend.

It’s best to work towards a spending plan that sees you earn more and spend less. It can sound obvious, but household debt is at an all-time high. According to numbers from the Federal Reserve, household debt is at `$14.6 trillion. If you have a lot of debt, whether it’s in credit cards, loan payments, etc., it’s vital that you start paying it down as quickly as possible. Moreover, it can have a negative impact on your credit rating, restricting you from financing investments, such as real estate.

Boost Your Earnings

Making money is another seemingly obvious step in wealth building, but there are various ways you can boost your earnings. Whether you decide to ask for a raise, find a new higher-paying job, or take on a side-gig, earning more money gives you more to use for investment and wealth-building activities.

If you’re happy in your job, consider the gig economy for some additional income. You may be able to use your talents and interests to help organizations looking for freelancers. Alternatively, if you’re looking for a career change, you could also take some training to expand your skills. This could allow you to find a higher-paying job as you’ll be a more attractive candidate with a broader skillset. The key is that when you earn more, don’t spend more. Rather, use that extra money for investing and saving.

Save

At IronOak, one of the things we advise clients is to pay themselves every month. Even if it’s a small amount. It may not seem like much at the start, but it can make a big difference over time.

It’s also crucial to start building an emergency fund. This should be about three to six months’ worth of cash you can draw from if something unexpected happens. Countless things can happen to hinder your income, and if you have enough put aside to meet your expenses for a few months, you’ll be better able to weather the storm. Having an emergency fund can provide peace of mind. It will also prevent you from making hasty financial decisions that will harm you in the long run. For example, relying on credit cards to pay bills or other expenses.

Here are some ways that you can start to save more:

• Eliminate unnecessary indulgences from your spending plan and add the extra money into your savings
• As your budget allows, expand your plan to allow you to spend a little extra without hindering your saving capability
• Sell items you don’t need (boats, RVs, appliances, etc.)
• Opt in to an automatic savings plan for your bank account

Invest Wisely

Making the right investment choices depends on your circumstances and your financial goals. It’s a good idea to start with a retirement investment plan. Our IronOak financial experts recommend contributing up to the match towards your employer-sponsored plan (401k, 403b, Simple IRA, etc.). If you’ve already done that, we recommend trying to max out your Traditional or Roth IRA. You can also look at either contributing to an individual account or allocating more money toward your employer-sponsored plan.

Other investing options include:

Stocks – these allow you to own a small slice in a company and benefit from increases to its share price and dividends the company pays out.

Bonds – these are government-issued investments. In other words, when you buy a bond, it’s the government that promises to pay you back, along with interest. They don’t hold the same earning potential as stocks, but they also have less risk.

Mutual Funds – if you want to invest in a variety of options, including stocks and bonds, you can opt to purchase mutual funds. You’ll be joining in with a pool of other investors, which means you’ll get a portion of the income earned.

Real Estate – investing in property is another reliable way to earn income over the long term. That’s because you can rent out the property and have a steady source of income. If you’d rather not have the hassle of managing a property, consider investing in a Real Estate Investment Trust or REIT. Your money will be invested in real estate, a strong investment, but you won’t have to oversee tenants.

Building Your Wealth

How to build your wealth comes down to what you have to work with, your income, your financial goals, and the plan you make to get from here to there.

At IronOak, we’re skilled at creating wealth-building plans that work. Contact us today and get your money working for you.