While a large majority of people want to be wealthier, financial freedom is their real goal. Most people want to know what they can do in life to make their money stretch further and grow their wealth by working smarter rather than harder. And to achieve this, it’s important to get to a point where you are able to manage your money effectively and put it to work on your behalf. No matter your current situation in life, the main aim should be to ensure that your money is working just as hard for you as you worked to earn it. Having a certain amount of money in the bank is essential for everyone, and saving or investing part of your income on a monthly basis is the best way to increase your wealth over time.
The Difference Between Saving and Investing:
There are marked differences between investing and saving that you need to be aware of. Saving is often the simplest and lowest-risk option, which involves putting away some of your income for the future. On the other hand, investing is an option that allows you to make your savings grow over time. Earning interest on their money, rather than simply paying it, is one of the main factors that set wealthy people apart from the rest. Spending less money than you are earning, putting the difference aside in a savings account, and using a diverse portfolio of investments to earn interest on your savings is key to building wealth, especially if your main goal is saving for your retirement. What are the steps involved in getting your money to work harder for you?
Set a Budget:
First of all, make sure that you have got as much control over your finances with a clear budget. Spending your money without a well-thought-out budget can be dangerous and leave you unaware when it comes to the amount of money that you’re paying out in expenses and more each month. Taking the time to put a clear personal budget together allows you to get a clearer picture of where your money is going, helps you avoid any nasty financial surprises, and makes it easier for you to make good financial decisions. When drawing up your budget, make paying into savings one of your main priorities alongside paying your mortgage, rent, and other essential bills and expenses.
Eliminate Your Debt:
Today, debt is becoming more essential than ever when it comes to getting the things that we need. Not all debts are bad – for example, a mortgage might be the biggest debt you’ll ever be in, but homeownership certainly makes it worth it. However, the truth of the matter is that until you are free of debts, your money does not really belong to you. Repaying debts for an extended period of time can leave you struggling to save more money and grow your wealth overall, so it’s a wise idea to concentrate firmly on paying your debts down or clearing them all together first. Clearing your smaller debts first is an ideal approach, helping you free up money that you can use to repay any larger debts faster.
Getting Started with Investing:
Once you have gained more control over your personal finances, it’s time to consider making some of your savings work harder for you by investing. With several investment options available, you do not have to be very wealthy to benefit from an investment portfolio. Although investing smaller amounts will not usually lead to huge immediate payouts, consistently investing any amount of money over time will help you grow your wealth gradually.
When it comes to investing, diversifying your portfolio as much as possible is the wisest approach to take. This will ensure that you are not risking having all your money invested in one single place, reducing your risk of loss. Before you get started with investing, spend some time educating yourself on the subject, looking into the various investment options that are available to you, and choosing the right platform. Wealthsimple has a lot of useful information on how to start buying stocks in Canada, which can be ideal for helping you get off to the right start with this popular investment type. Wealthsimple also offers various handy guides on choosing the right investment options for you, how to grow your retirement savings, and more.
Choosing an Investment Option That Works for You:
Once you’re at a point where you feel ready to invest, there are several popular options that make an ideal starting point for beginners to investing. It’s best to start off with a type of investment type that is easier to understand and get some practice with before moving on to more complicated investment options. Some investment ideas that are popular with new investors include:
Retirement Fund:
Opening a retirement account such as a registered retirement savings plan (RRSP) should be one of the first simple investments that you make. Investing in a retirement fund as early as possible should be your main priority if your main aim for growing your wealth is to enjoy a comfortable retirement in the future. An RRSP works by providing you with a space to grow your wealth tax-free as you save; you will only be required to pay tax on your retirement fund when you withdraw it, at which point you will be retired and in a lower tax bracket. Prioritize paying into your retirement fund on a regular basis and consider any options offered by your employer, since employers often match some or all of your contributions to your retirement fund helping you to grow your wealth faster.
Stocks:
Investing in stocks is one of the most popular and well-known investment options available. Investing in stock involves buying an ownership share in a publicly-traded company, and with many of the biggest and most well-known companies around the world publicly traded, there is certainly no shortage of options to choose from.
Bonds:
Investing in bonds involves lending money to a company or government entity. This option is often less risky than stocks, but with lower returns. You will be required to hold the bond for a certain period of time before it is repaid to you plus a predetermined amount of interest. The main risk with investing in bonds is that you may lose your money if the company that you are loaning to folds.
Index Funds:
Index funds are mutual fund types that hold stocks in a certain market index such as the Dow Jones Industrial Average or S&P 500. They provide investment returns that match the underlying index’s performance and are one of the best options available for anybody who wants to save more and build more wealth over the long-term, thanks to the diversification of the investments.
Real Estate:
There are various ways to invest in real estate that can provide significant returns when done right. Traditionally, those looking to invest in real estate have two options; these include purchasing properties that you collect rent from as a form of fixed income or purchasing properties to sell on for a profit in the future. However, there is a growing number of new options available to those who want to invest in real estate including real estate investment trusts, which own properties that generate income like shopping malls and hotels and offer regular dividend payments to those who invest in them. You may also be interested in joining a crowdfunded real estate project as an investor. This type of investment is an ideal option to consider for the future when you have built a healthy investment portfolio and are looking for new ways to diversify it further since investing in real estate can carry quite a substantial amount of risk.
Alternative Investment Options:
Stocks, bonds, index funds, and real estate are some of the most well-known and popular investment options out there. However, they are not the only ones to consider. There’s a market of alternative assets to explore if you want to trade something different or are considering diversifying your portfolio after getting started by investing in stocks and bonds. You can invest in currencies, cryptocurrencies, precious metals such as silver and gold, agricultural products, energy products, and much more. These investments often allow you to get started with a lower investment and can often be done entirely online with various platforms to choose from.
If you’re tired of feeling like you’re getting nowhere with money, it’s important to change the way that you do things and start putting your money to work for you. One of the best ways to make your money work harder for you is to get control of your debts and budgets, make a savings plan, and commit a certain portion of your savings to investments in order to improve your chance of growing your wealth over time. Today, getting started with investing is easier than ever with several options to choose from and easy-to-use online platforms to help.
