In life, there are times when you have the opportunity to create more wealth. Sometimes, wealth creation means budgeting or controlling debt, but it can also mean:
- Asking for a raise
- Joining the gig economy
If you need to create more wealth to reach your financial goals, we’re going to share a few ways you can start creating more wealth in your life.
8 Ways to Create More Wealth in Your Life
1. Create and Review Your Financial Plan Often
A recent survey found that the wealth of households for married couples between 55 and 64 was $430,000, and most of this money was in retirement accounts and home equity. Unfortunately, many people will not be able to live the retirement they want with this figure if they still have a mortgage or other household debts.
If you want to create more wealth, you should first create a financial plan with your advisor. They’ll be able to help you map out how to get from where you’re at now to where you want to be in the future.
Already have a plan?
Review it often. You should sit down with your advisor and review your plan to ensure the advisor knows:
- Your current financial goals
- Major life changes
A plan may show that with $430,000 you can comfortably live the life you want in retirement. However, if it doesn’t, your advisor will be able to help outline the steps you need to take to reach your financial goals.
2. Make and Stick to a Budget
Budgeting is financial freedom because it shows you the truth behind your spending habits. If you budget properly, you can live within your means and build the life you want. One survey found that 80% of people were budgeting for 2020 and 2021, up from 68% of people in 2019.
You should be budgeting, too.
A budget should include:
- Emergency fund
- Household maintenance
You can also use platforms that connect to your banking account and will help you track your income coming in and going out. When you budget and track your money, you’ll find many ways to cut back on expenses you didn’t realize were so high.
3. Manage Your Debt
Some debt can be considered “good” debt, given low-interest rates and the potential to build wealth.
However, if you have a lot of “bad” debt, such as high-interest credit card bills, it’s time to re-evaluate. For example, you may have $10,000 in credit card debt and pay over $100 in interest monthly. If you make just the minimum payment, you may be stuck paying off debt for 8 – 10+ years, and that ends up costing you a lot in interest.
Managing debt can help you create wealth because you could put that money into:
- Paying off your mortgage
- Extra car payments
If you have debt, you may want to consider paying it off using the snowball or avalanche method. That being said, we recommend discussing your debts with an advisor to help you determine the best way to manage and eliminate them.
4. Diversify Your Investments
Investments help you create more wealth, and you should begin diversifying. Risks are part of investing truths, but everyone has different risk appetites. If you want to weather the volatility of markets, be sure to diversify these investments.
You can consider:
- Real estate
- Rental properties
When you diversify your investments, you’re also creating multiple income streams that can help you create wealth.
5. Max Out Your Retirement Accounts
You should max out your retirement accounts or try to get as close as you can each year. If you have a Roth account, you’ll pay taxes now, but your money can grow tax-free. Limitations on contributions in 2022 are:
- Roth IRA – $6,000 ($7,000 if you’re 50+)
- 401(k) – $20,500 ($27,000 if you’re 50+)
If you can, max out your contributions annually, especially if your employer matches the contributions. The Roth account advantage of allowing your money to grow for free is too good to pass up. It’s important to note that your eligibility to contribute to a Roth IRA is based on your income level. Depending upon your income, you may phase out of being able to contribute. Speak to your advisor and see what options are available to you.
6. Ask for a Raise – Seriously
When was the last time that you asked for a raise? Self-employed individuals can give themselves a raise by raising their prices, but you can also ask your employer for a raise. If you don’t ask, you might be missing out.
Of course, there needs to be merit behind you getting a raise, so be prepared to justify your request.
What’s the worst that can happen?
If an employer says “no,” you’re no worse off than you were before. However, if they say “yes,” you’ll build more wealth doing the same job you already do.
7. Join the Gig Economy
Traditional jobs aren’t the only option for you to make money. The gig economy is booming, and the industry is projected to generate $455 billion in revenue in 2023. You can join the gig economy and begin generating more income.
You can use the extra money you make to:
- Pay off debt
- Build an emergency fund
Of course, you should also try to create passive income streams through long-term investments.
8. Invest for Long-term Growth
When you retire, you’ll have income streams that help you support your lifestyle. These income streams often come from investments, which should include long-term investment vehicles. A few of the ways to invest for long-term growth are:
- Purchase stocks that pay dividends
- Invest in things like index funds
- Consider annuities
- Look into peer-to-peer lending
If you want to create more wealth, investing for the long-term is going to make your money work for you.
If you follow the recommendations above, you’ll be well on your way to creating more wealth. Often, small tweaks in your spending or investing habits can make a drastic difference in your long-term wealth.
To learn more about how KPN Enterprises can help you with creating more wealth or to schedule a call, contact us here.