The topic of money is a bit of an anomaly. We treat it differently than just about any other topic. But why is this? And how can you flip the script?
4 Secrets You Can Put Into Action
If you’re overweight and looking to slim up, you look to people who’ve lost weight to help you figure out how to shed a few pounds. Or perhaps you talk with a nutritionist or personal trainer. But what you don’t do is ask an obese person for advice.
If you’re trying to battle cancer, you look to doctors and survivors for expertise and encouragement. You don’t seek treatment from someone who’s read a couple of medical books, or solicit advice from someone who’s been perfectly healthy their entire life.
Yet when it comes to money, this common sense seems to go out the window. People simply go with the flow and do what other broke people are doing. It’s why so many people pull out massive car loans and rack up credit card debt for things they don’t need. It’s why few people save or invest money anymore.
The reality is that you should be doing what the overweight person or sick individual does – you should seek advice from experts. And if you talk to those who’ve gone before you – people who have actual experience building wealth – they’ll let you in on secrets like these:
1. Avoid Credit Card Debt
Did you know that the average American household carries approximately $8,400 in credit card debt? That’s a staggering and stifling sum. It’s also one of the primary reasons why the average American can’t get ahead.
Credit card debt looms and lingers like a thick cloud of black smoke. It prevents you from having the cash flow needed to make smart investments. It also suppresses your credit score, which means you have to pay higher interest rates for good debt (like mortgages).
The best thing you can do is avoid revolving credit card debt. If you want to use credit cards for rewards and perks, that’s fine. However, you need to pay the balance off each month. (Only making minimum payments is a huge mistake.)
2. Buy Pre-Owned Vehicles in Cash
The moment you drive a brand new car off the lot, it drops in value. After the first full year of ownership, it plummets by 20 percent. Over the next four years, it loses roughly 10 percent of its value annually. In other words, a new car is a terrible investment – particularly if you couple it with a car loan that tacks on interest.
The best rule of thumb is to buy pre-owned vehicles and to pay for them in cash. Even buying last year’s model with a couple thousand miles on it can make a big difference. Let someone else take that 20 percent hit for you!
3. Build Equity in Your Home
Real estate is by far one of the best ways to grow your money. While most people buy a house and only think about whether or not they can afford the monthly payment, you should really be thinking about equity and how you can build more of it.
As Green Residential points out, there are two primary ways to build equity. Either the property value increases or your debt decreases. By doing both, you can watch your equity grow twice as fast.
While the larger marketplace controls your property value to a degree, you can influence it by conducting home improvements, maintenance, and repairs. As for reducing debt, create a budget and try to pay more than the minimum each month. Even making one extra payment per year can help you pay off your mortgage years faster.
4. Invest From an Early Age
Time is your biggest ally in investing. Someone who starts investing at age 30 will generate a far bigger nest egg than someone who starts investing at age 40 – even if the latter individual is more aggressive with how much they invest said Law Offices of Marc J. Blumenthal, Ltd.. Compound interested has often been called the eighth wonder of the world and you should put it to work for you.
Ready, Set, Build Wealth
The steps are simple, but they take hard work, discipline, and time to execute. While you might not live a flashy lifestyle or have all of the hottest and newest gadgets every year, this five-step plan is a proven one. If you follow each of these steps, you’re almost guaranteed to be insanely wealthy. It could take decades, but you’ll get there. As The Tortoise and The Hare fable has long taught us, slow and steady wins the race.