The United States boasts of having the most dollar billionaires in the world, coming in at about 724. If you play your cards right, we could easily see that number climbing to 725. But before we jump the gun, it’s worth noting that having money doesn’t make you wealthy, but makes you rich.
Everyone dreams of owning multiple properties and businesses across different states. We’ve never met a single soul that doesn’t want to be wealthy, and if you have, it was probably during your trip to the asylum. The million-dollar question thus becomes, how can you build independent wealth?
We’re glad you asked and we have all the answers you need right here. In today’s post, we’ll be showing you how you can build independent wealth and lead a life devoid of financial woes.
What Is Wealth?
Wealth is the abundance of valuable assets or means of support. It allows you to live a comfortable life without having to worry about money.
Independent wealth is when you don’t have to rely on anyone else for financial support and can sustain yourself and your family indefinitely.
There are different types of wealth, but the two most common are:
Passive income: this is money that you make without having to actively work for it. It could be from investments, real estate, or other sources.
Active income: this is money that you make from working. It’s the salary you receive from your job or any other type of compensation for services rendered.
While it’s true that most people are born into wealth, some people built their massive empires from scratch. This includes some famous names, like Jeff Bezos and Mark Zuckerberg. You too can become a self-made billionaire, and we’re here to show you how.
How to Build Independent Wealth
No one said that becoming wealthy was going to be easy, but it’s not impossible. Here are a couple of tips for building independent wealth.
Save More Than You Spend
Spending less than you earn and investing the difference seems like an impossible feat, but it’s not as hard as it sounds. You can start by evaluating your current expenses and finding areas where you can cut back.
Do you really need that $500 designer purse or those new shoes that just came out? No? We didn’t think so.
The only way to build wealth is to have a good handle on your spending and save as much as you can.
A few ways you can cut down on your spending are:
- Reduce subscriptions to streaming services
- Skip or cut your cable bill
- Cancel the gym membership you never use
- Avoid eating out
You can save a bundle every month by reducing your spending on things you don’t need. Once you cut down on spending and start saving money, you can start coming up with ways to save effectively.
Automate Your Savings
Now that you know how much you need to save each month, it’s time to automate the process. This way, you won’t have to think about it or be tempted to spend the money elsewhere.
You can set up a direct deposit from your paycheck into a savings account or invest in a retirement fund. Automating your savings is a lot more difficult for people who get paid in cash. If that’s the case, you’ll just have to be disciplined enough to set aside some cash for your savings.
The crux of the matter is separating your money into spending money and savings. Keep your savings in a separate account that’s hard to access. That way, you’ll be less likely to spend it on unnecessary things.
Invest Your Money in the Right Things
Once you’ve saved up enough money, you can start making investments to bring in extra income. But where should you invest your money?
There are tons of investment options out there, and it can be difficult to decide which one is right for you. The best way to find out is by doing your research and consulting with a financial advisor. You certainly don’t want to invest in something that will throw your hard-earned cash out the window.
Here are some promising investment options you should consider.
Retirement Accounts
Retirement accounts could be a 401(k) if you have a full-time job or an IRA if you’re self-employed.
The benefits of investing in a retirement account are:
- The money is automatically deducted from your paycheck or bank account
- The money is invested before you have a chance to spend it
- Most retirement accounts offer some form of tax benefit
If you’re not already investing in a retirement account, now is the time to start. It’s one of the smartest places to put your money, and it will pay off in the long run. The sooner you do it, the better it is for you.
Real Estate
Real estate investment includes buying property, such as a house or an apartment, and renting it out to tenants.
Investing in real estate has a lot of benefits, such as:
- The potential for the value of the property to go up over time
- The potential to earn income from rent
- The ability to get tax breaks
The best part about investing in real estate is that real estate property appreciates. That means that there’s a huge chance your property will be worth a lot more in the coming years.
If you’re thinking about investing in real estate, it’s important to do your research first. There are a lot of things to consider, such as the location of the property, the condition of the property, and more.
The ill-conceived notion that investing in real estate requires tons of capital. While it’s partly true, you don’t need to break the bank to invest in real estate. Liaise with reputable financial advisors like Henson Crisp, and they’ll show you how to do just that.
Start a Business
You can start an online business, a brick-and-mortar store, or anything in between.
There are lots of benefits to starting a business. Some of these benefits include:
- The potential to make a lot of money
- The ability to be your own boss
- The opportunity to make a difference in the world
Of course, starting a business is not without its risks. But if you’re passionate about your business idea and you’re willing to work hard, there’s a good chance it will succeed. Make sure you do tons of research before starting your business to get it off on the right foot.
The best way to do so is to talk to other business owners so that they can show you the ropes. Businesses take time to pick, but sooner or later, you’ll be laughing all the way to the bank.
Money Market Funds
Money market funds are similar to savings accounts, but they typically offer higher interest rates.
Some of the benefits of investing in money market funds include:
- The potential for higher returns than a savings account
- The safety of knowing your money is in a regulated institution
- The ability to access your money at any time
Money market funds are a great option for those who want to invest their money but don’t want to take on too much risk. They’re also a good choice for those who want to keep their money in a safe place.
Financial advisors are invaluable when investing in money markets. They’ll guide you and steer you in the right direction.
Certificates of Deposits
Certificates of deposits (CDs) are similar to savings accounts, but they typically offer higher interest rates.
The benefits of investing in CDs include:
- The potential for higher returns than a savings account
- The safety of knowing your money is in a regulated institution
- The ability to access your money at any time
CDs are a great option for those who want to invest their money but don’t want to take on too much risk. They’re also a good choice for those who want to keep their money in a safe place.
When you’re ready to invest in CDs, make sure to talk to your financial advisor. They can help you choose the right CDs for your needs and goals.
Be Wary of the Lifestyle Change Creep
After making a few promising investments, you’re not out of the woods yet. You need to be careful not to let the extra income get in your head. It’s not uncommon for people to get caught in the lifestyle trap and end up losing it all.
The lifestyle trap is when you start spending more money because you have more money. It’s easy to do, but it’s not a good idea because it takes you back to square one.
Although you’re making more money, remember that the best way to build wealth is by investing in more assets to bring in even more money.
Building Independent Wealth Simplified
By following the above tips, you’ll be well on your way to earning financial freedom. Clearly, building independent wealth isn’t as difficult as it seems. However, you’ll need a lot of hard work, dedication, and discipline to pull it off.
Always hire a financial advisor before making major investments for the best results. Otherwise, we wish you all the best on your journey to wealth and financial freedom.
Don’t forget to check out the other posts on the site for more informative reads.