On a basic level, building wealth often involves spending less than your income and making good choices with your savings. In this article, our investment specialists at Vesta Wealth offer 7 specific ideas for growing your net worth. The ideas we share here can be relevant for older and younger investors. However, all should be discussed with a financial planner to ensure they suit your goals, situation and risk tolerance.
#1 Career
It is no secret that certain jobs pay more than others. Some may offer increased opportunities for progression and higher pay, which needs to be balanced with how happy and secure you are in your chosen work.
Yet if you are serious about building wealth, it may be appropriate to consider your career path. Is it too late to pivot and retrain? If not, how could you earn more within your field? Bear in mind that building wealth, at its core, involves growing the distance between what you earn and spend, then saving or investing the difference.
#2 Spending
Building wealth goes beyond simply spending less. Every £1 spent towards a luxury now represents an opportunity cost of £1 that could have been invested to build your future wealth. This is not to say that all of your non-essential spending should be removed from your life. It just means taking an honest look at your finances and putting money towards building long-term wealth, where possible.
#3 Liquidity & debt
One of the greatest erosion forces on wealth is debt such as high-interest credit cards and loans. Clearing these, therefore, should be a top priority for anyone looking to grow their net worth. Consider starting with the smaller debts first, then working towards the bigger ones. Another key step is to have an emergency fund in place for liquidity – e.g. 3 to 6 months’ living expenses in an easy-access savings account, to prevent any sudden large expenses putting you into debt.
#4 Projects
Do you have a hobby or talent which could make extra money, not currently being put to good use? Doing some freelance work in the evenings and/or weekends – e.g. web design or graphic design – may be an excellent way to generate some extra income which could then be invested.
#5 Business
Could you start a business alongside your full/part-time job? Many people are daunted by the idea, but this does not have to involve committing huge amounts of time, money and resources up-front.
#6 Protection
You can be very successful at growing your wealth only to see much of it suddenly wiped away by disasters such as a death, injury or illness. Here, financial protection will be key to safeguard your wealth and your family. This could include life insurance, critical illness cover, income protection, private medical insurance and putting in place power of attorney and an up-to-date will.
#7 Investing
Having cash in the bank can be helpful e.g. for an emergency fund, but poor savings interest rates can lead to erosion of money in real terms, due to the effects of inflation. When it comes to growing wealth over the long term, it will be important to consider investing in other asset classes such as equities and fixed-rate investments. Average stock market returns may have been as high as 10%, for instance, although this comes with volatility and investment risk. Lower-risk assets like bonds tend to be more stable, making them more attractive to cautious investors, but typically return a lower rate. To grow your wealth, it is a good idea to consider how much you are setting aside each month as well as your investment strategy. A financial planner can help you look at these with a fresh pair of eyes and make good suggestions to improve tax efficiencies.
Invitation
If you would like to discuss your financial plan and investment strategy, then we would love to hear from you. Get in touch with your Financial Planner here at Vesta Wealth in Cumbria, Teesside and across the North of England.
Reach us via:
t: 01228 210 137
This content is for information purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult your Financial Planner here at Vesta Wealth in Cumbria, Teesside and across the North of England.