How To Accelerate Wealth Building
Although the idea of becoming an overnight millionaire is appealing to many, the only real way to get rich overnight is via an inheritance or a million lottery win. Will you be that lucky soul?
Wealth-building is a process that generally takes time. We all know that we need to spend less than we earn in order to build wealth. But that is only part of it and the beginning of the process.
Ironically, the best way to build wealth “fast” is to chart out a prudent path toward long-term gains. The quicker you can save and invest, the faster your money will compound, which is the true magic behind building wealth.
Things you should do to accelerate your wealth building
After years of experience in wealth building (although still have long way to go). Below are few important things you should do to grow your net worth as rapidly as possible.
1. Pay off high interest debt immediately
High interest credit card debt, unsecured loans, and basically anything over 6% per year need to be paid down right now. Most credit cards charge high interest rates -- as much as 18% or more - if you don’t pay off your balance in full each month. Virtually no investment will give you returns to match an 18% interest rate on your credit card. If you have too many cards balance and in difficulty to pay off, a debt consolidation loan can be a good option.
The longer it takes you to pay off your balance, the more you spend on interest. This process can significantly damage your financial stability, preventing you from saving money.
2. Start to save more money
You can’t begin any type of wealth-generation plan without having money to invest. As soon as you start drawing an income, make it your top priority to save as much money as you can. Set a percentage (min 20%) draw from your monthly earnings to be saved up. Put that in mind, save before you spend, NOT whatever is left after your spending.
Do some research, looking around for different saving plans which give you higher interest rates. Recommended going for an investment saving plan, which requires putting a fixed sum of money into your account monthly, the bank will invest a certain amount on behave of you. Generally, this will give you a higher return yearly.
3. Establish an emergency fund for liquidity
Besides monthly regular savings, you need to establish an emergency fund for liquidity. Most financial advisors will say as lease 4 to 6 months of your current income.
An emergency fund is an important corpus that could prove to be a lifeline in critical situations that require an urgent requirement of cash to help you and your family financially face a medical scare, unavoidable household repairs, sudden loss of job or salary or pay cut or something that impacts the saving plan and net worth.
​
4. Build multiple streams of income
An increase in regular income not only improve your financial stability, it directly increases your saving.
It’s hard to generate sizable wealth on a single salary, even if you save a large portion of it. To build wealth fast, set up multiple streams of income. For example, in addition to your day job, pick up a side hustle that matches your talents and abilities. We are not talking about an additional part time job that gives you $15/hr. Other income sources can do it from home without spending too much time and draining off too much of your energy.
One common side hustles most people talk about is "lease your skill". For example, if you're a programmer, also can provide programming services to the public as a freelance, web design, or even teach on online platforms like Fiverr and Udemy.
5. Pay yourself first
According to self-made millionaire and bestselling author David Bach, there’s “one, proven, easy way to get rich,” and that is to pay yourself first. What that means is simple. “When you earn a dollar, the first person you pay is you.”
Most people don't do that! They will pay for expensive dinners, online purchases, staycations, etc...
The key to paying yourself first is to make it automatic, meaning, to have money taken out of your paycheck and sent straight to your savings, retirement, or investment account. Invest in yourself, well covered by healthcare and life insurance, take up courses, and attend a seminar to enrich yourself. "knowledge is power"
6. Start Investing as early as possible
While developing a budget, saving money, and making a good income are all important, the best wealth-building strategies involve investing.
Today, you don't need to have a big bulk of the money to start investing. There are many low-cost options like Bond, ETFs (exchange traded funds), and Mutual Fun that can start as low as a thousand or two. Can refer to another article "How do I invest money" for better understanding.
Using Robo-advisor in managing and automate your investment is a good choice for beginner. Investors can now easily automate their investments in a pre-built diversified portfolio of ETFs that matches their risk tolerance.
7. Buy Dividend-Paying Stocks
Dividend-paying stocks may seem like a slow and boring way to build wealth, but they are one of the best ways to tap into a solid and growing source of income, and capital gains as well.
Dividend stocks distribute a portion of the company's earnings to investors on a regular basis. Most American dividend stocks pay investors a set amount each quarter, and the top ones increase their payouts over time, so investors can build an annuity-like cash stream.
Well-known companies in the S&P 500 index, like Coca-Cola and McDonald’s, that have raised their dividends for at least 25 years in a row. This means that those who bought these companies 25 years ago are earning huge effective yields on their original investment amount. Combined with the potential for capital gains, the Dividend Aristocrats can be a great way to build wealth.
8. Invest Into Rental Property
One of the key ways to build wealth fast — and over the long term — is to earn passive income. And one of the best ways to generate passive income is to own one (or several) rental properties. As property loan interest is still relatively low, it is still a good option to add it into your wealth building strategies.
With a well-managed rental property, you’ll receive a steady stream of income every month, unlike your mortgage payment, your rents will continue to rise over time, meaning your tenants will be paying some or all of your mortgage while you watch your properties appreciate in value.
Conclusion
How to accelerate your wealth building is how you can make your money work better for you. There’s no one-size-fits all for wealth building. No matter the path, what will make a difference is your consistency.
​