Building wealth is a goal for most people, but finding the best option for wealth creation can be overwhelming. Some people are tempted to consider get-rich-quick strategies, but they don’t often work and can lead to you losing your money instead of earning a return. The strategies used to generate and create wealth will vary depending on your overarching goals and objectives. If you are investigating your options to create wealth, here are three choices to consider:
1. Generate More Income
The first way to create wealth is to earn more money. You can find more ways to create more wealth, not by adding more work but by leveraging your time. It’s more difficult to become wealthy if you earn an average wage, but you can do it.
You can make money using these two ways:
Build Passive Income
Passive income is money you earn while you are not actively working. It’s typically a product of your labour that continues to produce income long after you’ve finished working.
For example, you could create content (e.g. photographs) and sell the copyright. The copyright produces income for you long after you’re finished with the work. This is one of the best ways to generate passive income.
A 2021 study from ING found that 48% of Australians either have or are planning to start a side hustle, which included selling items online (37%), freelance writing (13%) or creating art (13%).1
Work and Earn More
Earned income is money you earn during the time you are working. You could be an employee or a self-employed business owner. Earning money is an excellent way to build wealth, but it can take time to earn income in excess of your living expenses.
2. Save Money
The second way to build wealth is to save money. The goal of saving cash is to create a nest egg that you can use for emergency or big-ticket purchases. You can create wealth by saving money in these ways:
Track Your Spending
Whether you use a spreadsheet, software, or a basic pen and paper, tracking your spending will help you understand where your money goes, which will, in turn, help you rethink your financial strategies.
Focus on Needs over Wants
It’s hard to save money if you’re living above your means. The best way to save money is to be honest with yourself about your financial situation. For example, if you have a lot of credit card debt, you should focus on that before making unnecessary purchases.
Set a Savings Goal and Stick to It
Don’t forget to set a goal for your savings and stick to it. If you don’t have a goal, you may not have the motivation to work hard enough to create wealth and become easily distracted.
MoneySmart offers a free Savings Goal calculator.2
3. Invest Your Money
The third wealth creation option is to invest your savings. Once you have a good amount of savings, you can invest it. Investing your savings allows you to earn additional income to increase your wealth over time. By saving at least 10% of your earnings, you can allot a part of your earnings for emergencies, and then use your remaining earnings to invest.
Investment planning allows you to make money without adding extra work to your life. Investment strategies include:
Shares are financial votes in a company. Reputable companies with good shares are likely to do well in the future. Diversify your investment portfolio to include good companies with solid track records, and you should be able to earn a return.
Bonds are a type of loan that you make to a company or the government. The company or government then promises to pay you a regular interest rate, and you get the principal amount back after a certain amount of time.
Real estate is an investment in a physical product. For example, you could buy an apartment or house and rent it to people who need it. Real estate can be a great way to create wealth over time.
Time for Wealth Creation!
Wealth creation to achieve financial security is the primary goal for many people. If you’re looking for a sure way to achieve wealth, focus on these three keys: making money, saving money, and investing money. These three keys can get you started on your road to financial freedom.
Are you looking for expert financial planning on the Central Coast? Then contact the experienced team at Central Coast Financial Planning Group. You can have a dedicated wealth adviser helping you create and generate wealth depending on your goals, objectives, and current financial situation. Call us or book online today to secure your complimentary first meeting!
DISCLAIMER: The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice. Newcastle Financial Planning Group, Central Coast Financial Planning Group, Sydney Wealth Advisers, Coastal Advice Port Macquarie and Coastal Advice Ballina Byron are subsidiaries of Coastal Advice Group Pty Ltd which is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.