by Kailey Hagen | Updated July 17, 2021 - First published on May 20, 2019
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So you want to know the secrets to becoming fabulously wealthy? There are many paths to riches, but they tend to have a few things in common. Here are some tips that can help you grow your wealth, no matter what industry you're in or how much money you have right now.
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You probably already have a job that provides some income, but your earnings will be limited by how many hours you work or how much your employer thinks you're worth. You can get around this by seeking out additional streams of revenue. It's never been easier to pick up a side hustle, like driving for a ridesharing service or selling handmade goods online. Consider what you like to do and what you're good at, and look for ways to capitalize on them.
Remember, not all revenue streams require hard labor. You could rent out a spare room or an extra property, invest money, or earn royalties on creative works. It may take time to set up, but once you get these income streams going, you can just sit back and watch the money come in.
You may think the wealthy don't need budgets, but that mentality all too quickly leads to five- or even six-figure debts. No matter how much money you have, it's always a good idea to have a budget to keep your spending in line. Tally up your monthly living expenses and subtract this from your monthly income. Then decide what you'll do with the remainder.
If you have debt -- especially high-interest credit card or personal loan debt -- put most of your disposable income toward paying this down. Otherwise, use it to build up your emergency fund or save for long-term goals such as retirement or a home purchase. It's okay to allot some money to discretionary purchases, like dining out and entertainment, but this should never exceed 30% of your monthly income, and the lower you can keep it, the better.
If you won't need to access your money for years, you're better off investing it than keeping it in a savings account. The average savings account APY -- the rate at which your money grows -- is 0.09%. Inflation, by contrast, has historically grown at an average of 3% annually, so money kept in a savings account will likely lose value over time. Investing your money, on the other hand, can help it outpace inflation and grow many times over.
But you have to invest carefully. It's important that you keep your money diversified. This means separating your money across many different assets and sectors of the stock market so that if one of them takes a hit, it doesn't devastate your whole portfolio. You should also keep a close eye on how much you're paying in investment-related fees. Check your broker's fee schedule and read the prospectus of any funds you invest in. Try to avoid paying more than 1% of your assets in fees each year.
Finally, don't take big chances on unproven investments or try to time the market. You're more likely to lose money than gain it that way. Instead, stick to companies and sectors that you're familiar with and practice dollar-cost averaging. This means regularly investing a fixed amount of money in your holdings, regardless of their share price. Because the dollar amount is fixed, you'll buy more shares when they're cheaper and fewer when they're more expensive, so the average price you pay will be reasonable.
Anything you can do to further your education in your chosen field will make you more attractive to employers and could open the door to more lucrative jobs. Look into continuing education courses or additional certifications in your field.
Consider educating yourself about personal finance and investing as well. This can help you make smarter choices with your money that can help you grow your wealth more quickly. Warren Buffett says one of the biggest reasons for his success is his insatiable hunger for knowledge -- he reads for several hours every day. Imagine what an hour of learning per day could do for you.
Few things decimate your savings quite like an expensive medical bill. While freak injuries are unavoidable, you can substantially reduce your risk of severe illness and chronic health problems by prioritizing your health today. Eat healthy, exercise regularly, and be sure you're getting enough sleep.
Also understand what your health insurance policy does and doesn't cover and know how much you'll be expected to pay in copays and deductibles. Set aside money for your health insurance deductible in a health savings account (HSA) or emergency fund. That way if you do have an unplanned medical expense, you won't have to take on debt or dip into your retirement savings to cover it.
These may not be the get-rich-quick tips you were hoping for, but get-rich-quick schemes rarely pan out. Anyone can follow these simple tips, and they'll all make a big difference in your wealth. You may not see instant results, but if you stick with them, you will find yourself on the path to financial independence or even riches.
Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. The Ascent's picks of the best online savings accounts can earn you more than 8x the national average savings account rate.
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