Rome wasn't built in a day!
This phrase was a French proverb in the late 1100s but wasn’t added in English until 1545. The actual meaning of this phrase is - “Important work takes time”. This expression works as a plea for someone to be patient. The same concept goes with wealth building. People can become astonishingly wealthy if they have patience and a decent amount of time to achieve success.
Creating a good retirement fund is not an easy job. You definitely need a good income source to create a proper-sized nest egg. But, you may also need to prepare real-time strategies for handling upcoming expenses and savings. Most importantly, you should adopt a few basic smart habits that may help you to grow your wealth.
The purpose of this post isn’t about provoking someone to invest in a 401(k), Roth IRA, mutual fund, ETF, stock, or any other options. It is about spreading awareness of how you can build your wealth faster and achieve success in your life.
If you’re young and have sufficient income, you may begin your financial journey with some good basic habits of wealth building. Below, we’ll discuss those habits so that you can adapt them and grow your wealth fast in 2019.
1. Automate your money
By using this system you can transfer your money directly from your paycheck to investment accounts, savings accounts, and to the creditors automatically. This way you can maintain an uninterrupted flow of money towards building your wealth, without any fail.
For example - you may link your accounts and transfer the money automatically from your paycheck to your allocated account. This way your money will be paid to your 401(k) account, your savings account, and your creditors with credit card debts or payday loans.
2. Save on your home
You might like to stay in a rental home so that you may avoid the cost of buying a house. Beth Braverman for Forbes added - "Rentals offer far more flexibility. Buying a home typically means committing to a 30-year mortgage. Most people don’t stay in a home for anywhere near that amount of time, but it’s much harder to pick up and move from a home you own than it is to leave a rental."
So, if you are looking for flexibility, you may opt for a rental home. The rent might be higher, but you may have the option to negotiate with the landlord anytime you want. You may use a rent vs buy calculator to compare both the options.
Instead of paying monthly mortgage interests, you may choose to invest that money to yield greater profit.
3. Go for real estate investing
Real estate investment may not give you your desired results in a day. But it can grow your net worth very quickly compared to other traditional investment options.
If you buy a fixer-upper house, you may remodel the house and sell it for more than the net value of that property. It will give you a significant amount of profit if you do it correctly. The method is popularly known as house flipping.
If you’re interested in real estate investments but also want to diversify, investing in a real-estate ETF or an exchange-traded fund can be a smart option. For example - Vanguard’s VNQ that invests in stocks for purchasing office buildings, hotels, and other types of commercial property. This ETF was issued by real estate investment trusts (REITs). But, make sure you do your research properly and consider the chances.
Investing in private mortgage funds is another good option to grow your wealth at a low risk. Practically, it can provide money to house flippers who buy properties for commercial purposes. Lending money to trustworthy house flippers may diversify the risk associated with this investment.
Investing in REITs will let you engage money in real estate without holding physical property. It’ll also diversify your holdings based on the type of real estate class each REIT invests in. Financial advisor Chris Ball of BuildFinancialMuscle.com added - “It also gives me exposure to real estate without having to be a landlord.”
Few popular REITs include American Capital Agency (NASDAQ: AGNC), Annaly (NYSE: NLY), Realty Income (NYSE: O).
Many real estate experts predict that investing in the construction of new homes will be beneficial for the next few decades or more. It is because an entire industry of homebuilders are going to develop new neighborhoods and rehabilitate old ones. For this reason, it is a good time to invest your money in a bigger real estate deal. This can be either commercial or residential. Check out platforms like RealtyMogul or Fundraise for investing in real estate.
Investing in rental properties aka buy-and-hold real estate investment can be suitable for you if you plan to own the property for the long term. This investment option mainly depending on rental income, market appreciation, and tax benefits. Lenders offer rental owners rates starting from 5% with up to 30-year terms and 80% LTV.
4. Don’t ignore unexpected money
Don’t spend unexpected cash such as a bonus, birthday check or any other money gift you receive from anyone.
Keep saving money you receive from any surprise, even if it’s just $10 that your uncle gave it to you. Save as much as possible and use the money to pay off your student loans, pay off your credit card debts, increase your emergency fund, or to build your investments. Normally, you should save 20% to 30% of your total income.
You must sacrifice your urges so that you can put more of your wealth toward long term investments so that you can make a profit from it, and grow your wealth more.
5. Save on car
Do you have a car? Not yet? Don’t be so worried. Not having a car can save you a good amount on the monthly car payment and fuel charges. You may use that money for investing in your Roth IRA, or the 401(k).
As Jason Fogelson added in Forbes: "The biggest mistake a car buyer can make, especially in the age of the Internet, is to buy a car without doing research first. Some buyers are so eager to get through the car-buying process that they don’t take the time to find out everything they can about vehicle reliability, pricing, and financing."
That’s right. Car loan payments can be one of the highest debts of many American households.
But, in some cases, having a car can also save you a lot. You might be paying monthly car installments for a few years and also the fuel costs. But it is worth paying these costs if your transportation cost is way more than that. If your car can save money on transportation expenses every month, it is wise to buy one. Remember, these small normal expenses might stop you from building wealth.
6. Invest in your education
Your education will also help you to grow your wealth as much as your money. You may invest in your education and get your degree, become an MBA, or achieve a higher designation at work. Getting your high education certificates, degrees, and expert skills will help you to yield thousands of dollars of revenues in the coming years.
Education may not give you immediate results at the very beginning of your investment. But when you gain proper knowledge, skills, and a high designation, it will give you the boost to keep yourself ahead in the competition.
If you want to build your wealth quickly, investing $50 to $100 per month into your Roth IRA won’t be sufficient for you. It will also take a good amount of time to grow your nest egg through such a long-term strategy. But it’s not going to have any effect in the short-term.
If needed, you can consult with your financial advisor and analyze all the investment options based on your financial goals. It's also wise to talk to a few professional investors to know their secrets of wealth building. I guess each of them will suggest multiple options to invest money. Whatever option you choose, make sure you do your homework properly before investing.
Aiden White is a financial writer who lives in Foster City, California. She started her financial journey in 2015 and has been associated with consolidatecreditcard.org for the last 10 months. Through her writing, she has inspired people to overcome their credit card debt problems and solved their personal finance based queries. Being a debt fighter in her personal life, her goal is to share innovative thoughts and knowledge in the debt communities. Get in touch with her at firstname.lastname@example.org.