Daily Observer (Jamaica)

Simple ‘Secrets’ To Building WEALTH


There’s no shortage of get-rich-quick schemes, from flipping penny stocks to Ponzi and pyramid schemes; however, don’t be fooled by their promises of easy wealth. Schemes like these hide giant risks, and most investors end up losing money. Rather than getting caught up in “get rich quick” schemes, it is best to spend your time learning how to build wealth. This requires making an investment plan and adopting a long-term mindset. You will also need to set clear goals to identify and establish additional income streams, save, invest, and rinse and repeat the process. It sounds simple, but “simple” doesn’t mean it’s always easy to implement. The good news is that these changes will have a lasting and meaningful impact if you stick with them.

Follow these four steps to get started on building sustainabl­e wealth.

Start by Setting Clear Goals and Making a Plan: “Building wealth begins with having a clear vision with goals and a plan”. However, phrases like “I want to create wealth” and “I wanna retire rich” aren’t goals. They are just hazy dreams, not to mention they are unlikely to set you up for success. Wealthy people don’t simply expect to make more money; they plan and work toward their financial goals. They have a clear vision of what they want, make plans to achieve it, and take the necessary steps to get there. Therefore, to build wealth, you first need to determine what wealth looks like for you and what you want this wealth to enable you to do. Do you need the money to retire in a particular place or by a specific time? Your goal may be to become financiall­y independen­t. What does that look like for you? How much net worth do you need to have to consider yourself financiall­y independen­t? Another goal might be to own multiple rental properties. How do you plan to finance this? Will you take on a home equity loan? Will you buy property below market value?

Once you have set your goals, you will need to build a clear plan to get you there. Your plan to attain these goals might require changing your mindset, developing your skillset, setting deadlines, and rewarding yourself at each milestone, big or small. Whether you are already on the path to building sustainabl­e wealth or just getting started, the important thing is to set your goal, make a plan, act on that plan, and be open to adjusting the path to your goals, should you come upon roadblocks along the way.

Minimise debt: It’s difficult and not always wise to avoid debt entirely; however, compoundin­g high-interest credit card debt to fund lifestyles above your means may jeopardise your financial goals and is often called “bad” debt. On the other hand, debt that serves to build wealth, like a mortgage or a business-related loan, may be considered “good” debt, due to its wealth-building potential. However, being stuck in debt can rob you of your ability to accomplish your financial goals. Of note, one of the most powerful wealth-building tools is your income, and when you spend your whole life repaying consumptio­nbased loans, you end up with less money to save and invest for your future. This reduces your opportunit­y to focus on building and accumulati­ng wealth. It’s time to break the cycle of funding lifestyles with debt and start using debt to help build wealth!

Spend less than you earn:

Have you ever heard about the billionair­e who lives in a modest home? Probably not, but we bet you know his name. It’s Warren Buffett, and he once famously said, “Do not save what is left after spending, but spend what is left after saving.” If it seems like the rich and affluent know something about money that the rest of us don’t, it’s probably because they do. There isn’t a millionair­e on the planet who got that way by spending all the money they made. Spending less than you earn is one of the most important financial concepts to understand and live by. We are not implying you should deprive yourself of the things you enjoy or live the lifestyle of a monk, but it does mean not spending every penny you earn. Spending less than you earn may take some initial life changes, but the longer you do it, the easier it is to continue doing it. Above all else, living within your means is the key to financial success. If you combine the principle of earning more and spending less, you will be ahead of 95 per cent of the world.

Invest wisely: In the same way that you must make room in your financial plan to get your debt under control, you should also make room for saving and investing. However, it is important to know that building wealth requires more than just saving money. It involves investing your savings intelligen­tly. Compound interest has been called the strongest force in the universe, and you want that force working for you! The longer you wait to start investing, the longer it will take to build wealth. However, the first step to investing is to start saving and educate yourself on different investment options. There are certificat­es of deposits, money market accounts, stocks, bonds, mutual funds, and alternativ­e investment­s, like private equity, all catering to different risk tolerance. The most important part is that you can combine investment­s and create a diversifie­d (safer) portfolio, which will mitigate risks and maximise potential returns.

Wealth creation is not a onetime activity; it is a process, and you will need both time and patience to stay the course. If you incorporat­e these four wealth creation steps into your life, you will definitely be on the right track to reach all your financial goals, no matter what those goals are.

 ?? ??
Assistant vicepresid­ent – Private Wealth, NCB
Capital Markets Limited
NADINE THOMAS Assistant vicepresid­ent – Private Wealth, NCB Capital Markets Limited

Newspapers in English

Newspapers from Jamaica