Building long-term wealth is a fantastic goal to have! Despite your current financial situation, you can begin taking the steps today to create long-term wealth for you and your family.
Without question, attaining long-term wealth isn’t easy, but once achieved, the possibilities are endless! Let’s review how you can begin wealth building, and how you can protect this wealth for the long term.
What Is Long-Term Wealth
First and foremost, what is long-term wealth? Long-term wealth is wealth that cannot be easily spent or wealth that exists for the long term. For the purpose of this article, we are discussing long-term wealth as it relates to money.
Long-term wealth is not a specific number. For example, having $10,000,000 doesn’t automatically consider someone to be wealthy for the long term. If someone has living expenses or $9,900,000 a year, that $10,000,000 can dissolve very quickly.
Rather, long-term wealth is entirely dependent on the individual, their lifestyle, and their aspirations. Having long-term wealth means you have enough money to sustain your life for an extended period of time.
How to Build Wealth
If you want to start a long-term wealth creation plan, here are some actions you can start doing today that will benefit you long term.
Reduce Your Cost of Living
The more you reduce your cost of living, the more money you can save and invest. Saving and investing are critical ingredients to any wealth-building plan.
Common ways to reduce your cost of living include: dining out less frequently, avoiding credit card debt and unnecessary spending, as well as sticking to a personalized created budget.
Increase Your Income
If you are able to reduce your cost of living while simultaneously increasing your income, you multiplied the wealth-creating force! Increasing your income can come in many shapes or forms.
Perhaps you negotiate a higher salary at your existing employer, or you look for another career that may pay more. Additionally, you can pick up side hustles to bring in extra cash.
Consider freelancing, become a driver for Uber or Lyft or pick up a part-time job. Extra money should be used to pay off debt, and once paid off, the money should be invested.
Start a Business
When you start a business and employ people, you are multiplying your earning power. Consider the following example.
A single electrician may charge $50 an hour. In an 8 hour workday, they can make $400. However, if you own your own electrical business and employ electricians, you can generate a lot more income.
You may have 10 electricians working 8 hours a day, or 80 total hours per day for your workforce. If you charge your customers $50 an hour for labor and pay your employees $40/hour, you get to keep $10/hour, or $800 a day!
Starting a business, either big or small, allows you to multiply your earnings without always multiplying the hours you work!
Invest, Invest, and Invest
Investing your money in smart investments allows you to realize capital appreciation, and even consistent cash flow. Stocks, bonds, mutual funds, real estate, or even commodities are all tried and true investment vehicles.
Not only can the underlying asset class appreciate over time, but the asset may also pay a dividend. That cash flow can be used in your everyday life or even reinvested to generate more cash!
At a minimum, your investments need to keep up with the rate of inflation so your dollar does not lose its purchasing power.
Invest in Yourself
Some of the best investments you could make are the investments you make into yourself. You must be constantly growing and adding skills to your portfolio.
For some, college is a great personal investment. For others, attending and participating in professional coaching classes or seminars is sufficient. It doesn’t matter how you grow professionally, it just matters you focus on growing!
The world is competitive, and your skillset can quickly become less valuable if you don’t improve your knowledge or trade.
The Freedom Long-Term Wealth Provides
Long-term wealth is a goal worth chasing for numerous reasons. At the top of that list is the freedom long-term wealth provides an individual or a family.
When the correct amount of wealth is established and reached, that individual or family can live life on their own terms, and do as they please. If they want to donate money to a charity, they can do so. If they want to purchase a new car or put an addition on their home, they can do so.
Of course, their freedom is all within reason, but they do not need to take on debt to fund the life they want to live or the choices they want to make.
Protect Your Wealth
Wealth creation is important, but so is protecting the wealth you’ve created! As mentioned above, your wealth can quickly evaporate if you live above your means and do not stick to a proper budget.
The best way to protect your wealth is to work with a certified professional financial advisor. A financial advisor will take an unbiased view of your financial situation, and help you put the right parameters in place to ensure you are not spending too much money.
You don’t need to be wealthy to start working with a financial advisor either! In fact, the sooner you start working with an advisor, the better. They will help you establish proper money management skills that will benefit you long term.