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Building wealth may take time and effort. While it’s possible to come into wealth quickly — such as by winning the lottery — it’s not statistically likely.
However, some strategies might help you build wealth and create financial independence. Here are eight tips and strategies to try if you’re trying to become rich.
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- Invest
- Take advantage of compound interest
- Create a plan and follow it
- Start a business
- Cut spending
- Try taxing yourself
- Consider additional education
- Take calculated risks
1. Invest
The goal of investing is to buy assets that may provide financial growth over time. For example, a home can be a financial investment — its value can increase over time. A new study found that many Americans’ financial stability hinges on homeownership.
Some investment options you may want to look into for building wealth include …
- Stocks
- Bonds
- Mutual funds
- ETFs
- Real estate
- Money market funds
While investments can provide financial benefits, they also come with varying degrees of risk. For example, investing in stocks can provide great potential for growing your wealth over a long period, but there’s no guarantee the businesses you invest in will do well.
Because of risk, it’s important to consider your investments carefully. If you need help, you may consider talking with a financial adviser.
2. Take advantage of compound interest
Compound interest is earned on both a principal amount and its accrued interest. Compound interest allows investments to grow at an exponential rate rather than a constant rate.
Look for bank accounts with the best interest rates to take advantage of compound interest. The more often interest compounds, the more quickly money can grow. You may also be able to use the power of compounding in investments by reinvesting your earned dividends into more investments.
3. Create a plan and follow it
The U.S. Department of Labor recommends considering your financial goals and creating plans to achieve them. This includes both long- and short-term goals, each requiring different strategies. Long-term goals typically take over five years, and short-term goals usually take less than five years.
4. Start a business
With three out of four millionaires being self-employed individuals and entrepreneurs, starting your own business might be a venture you may want to consider if you’re interested in accumulating wealth.
Being an entrepreneur is not usually a quick way to get rich — businesses take time to grow and don’t always turn a profit. According to the U.S. Small Business Administration, successful entrepreneurs often have …
- Creativity
- Persistence
- Flexibility
- Passion
If that sounds like you, becoming an entrepreneur might be a good way to build your net worth.
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5. Cut spending
While becoming rich may conjure images of fancy sports cars and luxury clothing, this may not always be true. By cutting spending, you can create more space for saving and investing, which can ultimately help you accumulate wealth.
6. Try taxing yourself
Try to resist the temptation to spend as much as you earn. A key part of amassing wealth is being able to save.
A different way of looking at your savings is to view them as taxes. Set money aside in a savings account or transfer it to a separate account where you can’t touch it.
Treat your savings like money you will never get back until a planned day — like when you buy a new home or retire.
7. Consider additional education
Did you know that workers with a bachelor’s degree make almost twice as much money as those without? It’s true. According to a 2020 study from the Bureau of Labor Statistics, education pays. Those with bachelor’s degrees earn a median weekly income of around $1,305 compared to $781 for those with only a high school diploma.
If you’re wondering what jobs make the most money, medical care jobs tend to top the charts.
8. Take calculated risks
Whether starting a business or investing in stocks, making money often requires risk.
To make money, you may have to take a chance that a venture or idea you have will pan out. Therefore, it is important to think deeply and evaluate multiple possible outcomes before you decide that investment is worth it. It’s OK to take risks, but they should be calculated and thoroughly researched.
What’s next? Make a financial plan.
Being rich and building wealth means something different to everyone. Some people may only want a decent-sized home and a livable salary. Others may want to be millionaires and billionaires. Make a financial plan with manageable milestones and celebrate the wins as they come.
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