How To Start Building Wealth

Eliminate Debts and Accumulate Assets To Build Wealth

Building wealth takes time, effort, and discipline. The good news is that there are strategies that can help anyone build and preserve wealth over the long term. The earlier you start putting these into practice, the better your chances of success.

The first step is to earn enough money to cover your basic needs, with some left over for saving. Building wealth over time requires an understanding of how to save and invest wisely, safeguard assets, and manage your debts. Most of all it takes discipline and patience.

It’s important to manage your debts, taking on too much debt could impede your progress toward your wealth-building goals. To manage debt, be mindful of your debt-to-income (DTI) ratio and make sure that your debt payments are manageable within your budget. You should also aim to pay off low balances as quickly as possible and use the freed-up money to pay on larger debts.

Eliminate Debts 

The main reason most people cannot save or invest is because they have too many unnecessary debts and a lack of money management skills. If you are deeply in debt the first thing you need to do is to figure out where you are, then figure out how to reduce and eliminate your monthly debt load. The objective is to eliminate your debts as quickly as possible. First, make a list of all of your monthly debts, do not include things such as utilities or rent payments. List each creditor in order, from the smallest balance to the largest. Focus on paying off the smallest balances first and work your way up to the largest. As you pay off one account put the money towards paying off the next lowest debt. Keep doing this until you have reduced or eliminated your debts. Do not get any new debts in the process; this will only defeat the purpose. 

If you cannot pay on all your debts each month, make sure to pay those that are in good standing first and negotiate to pay your other creditors a lesser amount, or to pay them later. Make it a point to always keep your good accounts in good standing. Remember, the less debt you have the more money you will have for investments. It is almost impossible not to have any debts, but it is possible to have a lower debt load that is easily managed. The formula is simple, spend less and save more. 

Invest In Assets

 Assets are economic resources. Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset. Simplistically stated, assets represent ownership of value that can be converted into cash (although cash itself is also considered an asset.

The reason most people never accumulated wealth is because they “believe” they cannot afford to invest, though most people can afford to invest in assets. Investing is a matter of belief. Too many people are willing to pay for a new television, unnecessary car payments, unnecessary cell phones, and other non-essentials, but they are not willing to invest this same money in to assets such as real estate, mutual funds or individual stock purchases because they have been programmed to believe that they can or will lose their money, when in-fact they are losing money on the non-essentials that have absolutely no potential of future gain. 

Too many consumers let the media scare them away from investing while steering them towards spending. In general, many people will act based on what they see or hear and rely on media sources to provide them with information that will trigger them to take action, whether the information is relevant or not, a certain number of consumers will respond without investigating. For example, people will rush to purchase the newest cell phone even though there will be plenty of them available at lower prices a few weeks later, or people who will not invest in the stock market because they heard on the news that the stock market is going down, not realizing this may be a good time to purchase certain stocks at a lower price, or they here about the falling real estate prices and decide it is not a good time to buy, when in-fact it is the best time to buy.

An example of how you can benefit from bad market, or company news when a company’s stock down because they are experiencing financial difficulties you can start accumulating the stock at discounted prices and hold the stock until the price goes up again. In some cases, you can find stock below two dollars per share. 

Start accumulating as many assets as possible. This should consist of real estate, stocks, gold, silver, or anything that has future value. There is no guarantee values will not go down, but if you diversify your investments and hold for the long-term, you will be better off than you will be if you do not invest. Building personal wealth is process that if done correctly, it works.