A large number of people think that making money in the long-term is equivalent to building wealth. While your earnings can be considered as the determinant factor to the amount of money you can save, it’s not similar to creating wealth. Thousands of Americans find it difficult to build a considerable amount of savings or financial wealth despite their good pay, leading to inadequate economic stability at retirement.
That is why you need to have a long-term vision that makes you see far ahead into your future, thereby motivating you to come up with viable ways of making money to create financial stability not only for yourself but also for your family. Investments are a good place to create your wealth. You don’t need a lot of money to begin investing in your future financial goals. Simply start where you are with what you have and watch your money grow. Below are several ways you can create your wealth.
1. Build your savings in a bank
A good method to multiply your money for longer periods is by looking for a bank that offers higher than normal interest rates on their savings accounts. Such accounts yield a higher than usual income but largely depend on the amount of money you keep the account and the length of time it stays there. Financial experts reiterate that you can multiply your money twenty-five times more by keeping your money in high-interest savings accounts as compared to saving in a regular account. These types of accounts can be found online or in other financial institutions.
American Express is one such institution in which you can open a high-interest rate savings account that offers an APY (Average Percentage Yield) of 1%. That means, for example, if you open an account with an initial amount of $25,000, and thereafter deposit $500 every month for the next five years, you stand the chance to earn at least $2,000. There are many other options available including CIBC and Citibank offering a 1.05% interest rate on their APY, being among the highest in the market.
2. Long term stock investments
A considerably high number of wealthy and financially stable households have invested in long-term stocks. It is easy to start investing even without a stock professional by downloading the app on your smart phone. Many stock investment companies have the provision of starting with very small amounts of money.
The S&P 500 index is a good investment option, to begin with, because it has very little risk when compared to various other stocks. Such an index fund does not necessarily compete with the market but instead tries to correspond with the overall market growth in the long term. Thus they are cheaper and safer to oversee, making it more favorable for new investors.
Other than these funds being the perfect investment options for longer periods, SPY and VFINX (Vanguard) keeps tabs on S&P 500. However, you can also search for other alternative index funds that you can also invest in. Investing in the long-term does not only reduce your risks, but the taxes are much lower than short-term stock investments, yielding high returns.
3. Real Estate
A passive income that you can invest in and make very good returns is in real estate. It can be an expensive venture but is an excellent method of building your wealth. Even with little money or lack of financing, there are benefits you can gain from Real Estate Investment Trusts (REIT). These are trusts that manage your real estate investments similar to how a company like Vanguard would buy and manage stocks on your behalf. Just like you would stock investment, you can trade in REITs by purchasing and selling your shares to make money for your future.
Another way you can grow your wealth through real-estate is by selling your current home at a profit and buying another home with part of the money you have made and saving the rest. If you have several properties, you can rent them out and sell them after some time when the price has appreciated, thereby making a good income.
You do not have to be a landlord, but you can employ an investment expert who will manage your properties for you at a fee. Despite this being expensive, a real estate manager will assist you to make good returns. With their expertise, they can advise you on the best properties to buy, especially if you are just starting with no prior experience. Remember to do thorough research before you embark on your real estate journey. With a well-thought-out plan, you will avoid pitfalls that could make you lose money. Just as with stocks, you need to make sound decisions and invest in the long term.
4. Start early on your retirement plan
Planning early for your retirement gives you a stable financial income in your old age. You need to do this as soon as you enter adulthood by opening a savings account specifically for your retirement. For a clearer guide, you can use the 401(k) to estimate the amount of money you need to have saved when you reach your 60s.
While an IRA may be the preferred saving method for retirement, some people will go for the Roth IRA because they gain much more at their retirement. This is made possible as taxes are paid only when making deposits and not when you withdraw from your account. Experts advise that to have a good portfolio for your retirement, you need two fundamental components; equity, and income. With sufficient savings and sound investments, there should be no interference with your retirement goals.
5. Debt elimination
Eliminating debt should be one of your priorities, as you can invest elsewhere from the extra money. A good approach to reducing your debt and eventually paying it all is by creating a debt management program. Talking to professional creditors can assist you to write out a workable plan that will pay off all your debts and free you from this financial burden.
Normally, the first place to start is by getting rid of debt on your credit cards. It is the easiest to tackle. Your financial advisor may suggest that the interest on your card be frozen. However, this is only feasible when in agreement to making higher installment payments to clear your debt much faster. To go ahead with this method, you will be required to put it in writing to show your commitment.
Another way of getting rid of your debt is by refinancing any mortgage you may have and also refinancing your cash out. This is an excellent way to increase your funds to pay off other smaller debts and remain with a one-off repayment. But before you do this, compare different refinance rates for homes to ensure your plan has lower interest rates than that of your present debt payments. You may need to seek professional advice to develop a manageable debt payment plan so that all your debts are paid off successfully. There are charitable organizations or credit unions that you can approach for professional input on debt payment plans at no cost.