There are two kinds of people in the world — those who live their entire lives dreaming about being wealthy and those who put in the effort and actually do end up wealthy. If you want to build up wealth, then it is necessary that you stop daydreaming about it and start acting. Here are five strategies that can help you achieve your goals.
1. Dealing with taxes
Always pay taxes on time. Delaying tax payments will attract expensive penalties that will deplete your income. Make sure that you are not overpaying on taxes. Check out how much income tax is being withheld from your paycheck. You can make adjustments to the amount by filling out a W4 form at work. The goal is to have your employer withhold only enough to cover your tax bill. Though people enjoy getting a big tax refund, you are essentially loaning your money to the government interest-free for the year. Is there any bank on the planet that would do that? Then why would you? Instead, put that money to work by placing it in savings or using it to make investments.
2. Multiple income streams
Develop multiple income streams. Do not get stuck on the income that you generate from your primary job. If you have any secondary skills, try utilizing them part-time. For instance, you may be employed as an accountant. If you are skilled in art, you should try freelancing as a digital painter or illustrator. Once you have built up some savings, you can invest some of your money in a business of your own or one started by a friend. Real estate can be another good investment. Once you have bought a property, you can either look for your own renters and deal with any needed repairs or hire a property management company to do it for you. Having multiple streams of income will give you a bigger amount to invest every year, thereby helping you build wealth faster.
3. Avoid defeatist attitudes
Creating wealth is one part talent and one part mindset. No matter what skills you possess, you will end up losing your money if you have a defeatist attitude. None of the wealthiest people in the world made money by remaining depressed after making a bad investment decision. Instead, they took their losses as learning experiences, identified their mistakes, and improved themselves. If you lose US$10,000 by investing in a local shop, don’t beat yourself up for it. Look at why the investment became a loss. Was the owner of the shop poor in managing expenses, eventually leading to loss? If so, make sure that you properly vet the quality of your next business partner. Accept your defeat and move on. Otherwise, you will remain defeated.
4. Track your expenses
Keep track of your monthly expenses. Where do you spend your money unnecessarily? Can you save that money instead? If so, do it. Maybe you spend US$5 every day on a pack of cigarettes. If you can give up smoking, you not only improve your health but can also invest that money. Think US$5 per day won’t amount to anything? You are dead wrong. If you invest US$5 per day in an account that is able to generate an 8 percent annual return, you will have nearly US$215,000 in 30 years! This is money you surely cannot ignore.
5. Be patient with investments
Always be patient with your investments. Though it is true that some investments give you a ridiculously high return in a short amount of time, this does not happen in most cases. When you bet on a company’s shares, see to it that their financial fundamentals are solid, their business prospects are good, the market they operate in has a bright future, and the management is motivated. Once you are sure of the potential of the company, invest and patiently wait for a few years.