Building wealth works on two principles: one, spend less than your income and two, find ways to earn more money.
To achieve the financial success and freedom that you want, you should be able to save on your income. Your ability to save regardless of your income is quite important in the wealth creation process. You can earn a Higher Salary but if your financial management is poor you will still be living beyond your means meaning you won’t be able to save any money.
The only way to way to earn more money on your savings is to invest it. Here are the simple ways to build your wealth.
Cut your living expenses
Just because you have the money doesn’t mean you have to spend all of it. Learning to live below your means will reward you with more money in your bank account which you can then invest to earn more money and grow your wealth.
Find ways to save on your budget through habits like eating in instead of going out or ordering takeaways.
It’s easy to fall into the trap of lifestyle inflation as your income grows. This results into your savings remaining stagnant while your living expenses grow. The most common one being moving into more expensive apartment that you don’t need simply because you now earn more money. As a general rule, you rent shouldn’t be more than 30% of your after-tax income.
Start a side hustle
A side hustle supplements your regular income to put more money in your pocket so you can easily meet your financial obligations and invest more.
You don’t have to quit your main job to attend to your side hustle business unless you are absolutely certain you can make significantly more money if you give it 100% attention. Until then, build your side business while holding on to your day job.
An ideal side hustle should be a project you are passionate about or a business you understand quite well so running it would be enjoyable and less strenuous.
Invest in a unit trust
Unit trusts offer better returns than a savings account in most banks. A unit trust allows you to make contributions in a collective scheme for bigger investment projects that you would have otherwise not afforded individually.
Your contributions and those of other small investors are pooled together by a fund manager who then finds a suitable investment idea to pump the money into.
The advantaged of unit trusts is that the return on your investment is almost guaranteed.
Invest in other people’s businesses
If you are in employment, you can have the capital to start a business but lack the time and skills needed to set up and run one. In this case, you can take the risk of investing in someone else’s business.
There are a lot of entrepreneurs with brilliant ideas but who lack the funding they need to implement and grow their businesses. That’s where you step in.
Get a professional to valuate and assess the viability of business first before you put your money into it.