By: Raymond James
About the Author:
Ray is a sought after thought leader and an expert in financial and money management. He has been published and featured in over 50 leading sites and aims to contribute articles to help novice financial planners. One of his goals is to impart his knowledge in finance to educate and help ordinary people create and achieve their financial goals.
Some people strive for a job with a massive salary. However, the ability to earn is not the same as the ability to build wealth. If you have a massive salary, it is also a good idea to ensure you are actually building wealth. If, however, you are like most people and do not enjoy the luxury of having a massive salary, it is vitally important to understand the best ways to build wealth because your salary is not going to get you there on its own. The good thing about building wealth is that there are several proven vehicles and strategies that will help you grow your financial base while offering decent returns and a buffer against undue risk to help you maintain your peace of mind.
- Certificate of deposits
In terms of reliability and reduction of risk, a certificate of deposit (CD) offers investors the peace of mind that stems from federal insurance along with a guaranteed level of return. This interest can be rolled over into another CD, or it can be deposited as cash into an external account. The CD is so safe because it contractually obliged the investor to leave the funds in a high-paying type of savings account for a duration that can range between 18 and 60 months. In terms of payouts, longer durations result in higher interest payments.
The reason that a CD is so safe is that it is a banking instrument that benefits from being insured by the Australian Government guarantee. This program guarantees the safety of funds in a bank up to $250,000. Banks that qualify for this type of insurance are institutions authorized to take deposits (ADI).
- Real estate
Real estate is one of the proven methods for investors to build wealth as most properties appreciate over time even if they are not developed or improved. If a property is improved, even if just slightly, the amount of appreciation can be significant over time.
In terms of real estate, investors can invest in residential properties. The process of residential investing can involve simply living in a house as it appreciates. Other ways to invest include purchasing or mortgaging a multi-family residence and renting out the space. This process is proven in that it allows property owners to pay off the mortgage using the tenant’s rent payments. The difference between the rent payment and the mortgage payment can then be used for improvements, or it can be saved and invested into another property.
In terms of risk, real estate involves more risk than a CD, but insurance mitigates much of this risk, and the payout over time can be truly enormous.
- Diversity
When building wealth, the vehicle is often not as important as the overall strategy. One strategy that helps people build wealth is by creating a diverse portfolio. Doing so ensures that any dips in one or more industries are offset by the stability or gains in other industries. By maintaining a diverse portfolio, investors can also benefit from economic times when all industries stride forward toward significant market gains.
- Mutual funds
Mutual funds are a proven method to invest in stocks in a way that achieves diversity. Because a mutual fund is made up of multiple stocks, the overall value of the fund is likely to improve over time. For greater diversification, mutual funds also exist that include multiple industries.
- Superannuation guarantee
The superannuation guarantee is similar to programs like the 401(k). Of course, this program allows investors to build savings. However, it also benefits investors by taking advantage of contributions made by employers. As with any third-party contribution program, the real value rests in the fact that contributions lead to increased compound interest. Even in a few years, the exponential nature of compound interest can launch someone with a meager net worth into a position of stability or luxury.
- Minimize spending
It might seem obvious that people who spend their earnings will not have any savings, but in practice, this observation is difficult to implement. Many people have so many perceived needs that money trickles from the bank account to service providers, stores, or credit payments until there is no financial security whatsoever. Simply put, you need to eliminate your perceived needs. If you can do this, you can minimize spending.
- Advice
When it comes to proven strategies of attaining wealth, the most successful people have advisors. For instance, if you search for “Gold Coast financial advisors,” you can benefit from the expertise of industry veterans who can help you understand the best available investment opportunities or vehicles. Equally important is the fact that an advisor can help you stay focused on your goals. Finally, an advisor can help make the entire process of investing less confusing, allowing you to understand how you can reach your saving milestones.
