Financial independence is a goal that most people today are actively pursuing and would like to achieve in their lifetime. This does not happen overnight. It is a journey that involves actively building wealth by adopting and developing good financial habits like saving and investing. This demands commitment.
The key to building wealth is starting and being consistent. Many people put off wealth creation because they think they do not have enough money to start. If you started investing now with the little you have, you will be in a better financial position down the road. This is as a result of compounding.
If you are looking to start creating your wealth in 2021, here are a few ways you can start growing the little money you have.
#1. Save money to make money
To invest, you first need money. If you think that you have too little to jump into the stock market, begin by putting away a few dollars every week.
In the beginning, it may seem like a time-consuming endeavor but you will end up accumulating the money you need sooner than you think. You can stash your savings away in a shoebox or a savings account depending on the location you consider safe.
#2. Park your money with treasury securities
This may not make you rich, but it provides a safer and more profitable way to park your money instead of letting it sit in a savings account. To protect your money from inflation, you can buy Treasury Inflation Protected Securities (TIPS) which adjust your principal for inflation.
#3. Invest to beat inflation
If you decide to save your money in a financial institution, it may earn a lucrative interest. However, with the inflation rate being significantly higher than the interest rate, saving for a long time makes you poorer.
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Putting your savings into investments is the only way to keep your wealth growing faster than inflation. There are various investments you can make, but you should always keep in mind that investing is a risk and the potential for losing money is as real as that of making it. Visit Stock message boards to get news and pointers from fellow investors.
#4. Enroll in your employer-sponsored retirement plan
Planning for retirement is not a reserve for the advanced in age. You should start planning your retirement as early as possible especially if you plan on retiring early. If you are working your first job and are very tight on cash, consider enrolling in your employer’s retirement plan.
The amounts you invest in this plan are so small that you can barely notice them. Tax deductions that this contribution enjoys make it even less painful. Increase your contributions gradually as your pay rises.
#5. Low-initial-investment mutual funds
Mutual funds are perfect for new investors since they allow you to invest in a portfolio of bonds and stocks with a single transaction. Mutual funds require initial minimum investments.
The initial investment demanded by most mutual fund companies is out of reach for first-time investors with limited resources. There are some however that waives the minimum requirement in favor of an automatic monthly contribution. These low-initial-investment mutual funds provide a way for first-time investors to get into the investment game.