Hello, Cool-Girls! Today, I wanted to share Financial Secrets with you. For over a year, we’ve all been witnessing our purchasing power dwindling. Our generation sees our dreams of owning a home slipping away, and we wonder how we’ll ever be financially prepared to have children. It’s not that our generation is pessimistic or lazy. It’s the reality that the current economic climate is less favorable than it was during our parents’ time.
Today, I want to offer you a glimmer of hope for self-empowerment. I don’t have a magic wand to make us all rich overnight. But I’d like to share my knowledge and experience when it comes to building wealth. These aren’t financial secrets, just general principles of wealth building and asset appreciation that have existed for centuries and should be known by everyone. I hope these principles will help you approach tomorrow with a more sustainable mindset and gain some perspective on the current situation.
1. Financial Secrets: Build an emergency funds ASAP
In today’s uncertain world, having a financial safety net is crucial. Start by setting aside a portion of your income into an emergency fund. This fund should cover at least three to six months’ worth of living expenses. Having this cushion will provide peace of mind and financial security when unexpected expenses or emergencies arise. This cushion can give you the luxury of leaving a toxic job environment when needed.
2. Focus on Increasing Your Streams of Income
Relying solely on a single job may not be enough to secure your financial future. Look for opportunities to diversify your income sources. This could involve taking on a side hustle, investing in real estate, or starting a small business. Multiple income streams can provide stability and help you achieve your financial goals faster.
3. Financial Secrets: A Job Will Never Make You Wealthy
A high-revenue job is certainly a key towards wealth, it gives you the means to create an emergency funds and the means to invest. The higher your salary, the higher your capacity to invest. However, relying solely on it typically won’t lead to wealth accumulation especially if you spend it all on a lavish lifestyle. This is risky because, in the event you lose your job, you could be left with nothing.
Instead, view your job income as a solid foundation upon which to build your wealth through additional means. For example, you can consider investing in stocks to receive dividends or obtaining a loan to invest in real estate that can be rented out for extra income. (To make a profit from this property, the rent needs to be higher than your monthly loan payment). These alternative income streams provide a safety net, ensuring that you have financial support even if you lose your main income.
What’s particularly interesting is that these new income streams can create a compounding effect if you choose to invest your earnings.
4. Good Debt Makes You Money
Not all debt is the same. Good debt is often linked to investments that have the potential to appreciate over time, like real estate or a carefully planned business venture. When managed wisely, good debt can be a powerful tool for wealth generation and asset building. So don’t be shy use the bank’s money.
5. Financial Secrets : Bad Debt Takes Away Your Freedom
On the other hand, bad debt is typically associated with liabilities, such as the house you purchased to live in or the consumer loan you took out to buy a sports car. It’s not inherently bad, but it’s important to understand that accumulating too much bad debt can limit your capacity to acquire good debt then to expand your potential wealth. So, if your goal is to build wealth, it may be wise to prioritize accumulating good debt as a first step in your financial strategy.
6. Don’t Spend to Impress People
It’s easy to succumb to the social pressures of flaunting your wealth through extravagant purchases. In another article I explained Why Comparing Yourself to Others Is Bad. When you see people around you going into debt to acquire their primary residence, it’s important not to be deceived. Often, this can be a suboptimal investment for several reasons. Firstly, there’s the constant need for maintenance in a house, and property taxes are on the rise. Moreover, we’ve all witnessed how choosing a place to live can lead us to overspend in pursuit of the dream home, often buying above the market value.
In contrast, when you’re buying a property for rental purposes, your focus shifts from personal residence to generating income. True financial success doesn’t stem from impressing others with material possessions. Instead, it’s about dedicating your resources to long-term financial goals and steering clear of unnecessary expenditures that don’t align with your priorities.
7. Passive Incomes Could Buy Your Freedom
Passive income streams, such as investments in stocks, real estate, or a well-managed business, can provide financial freedom. These income sources continue to generate money with minimal effort on your part, allowing you to have more control over your time and pursue the lifestyle you desire.
Disclaimer
The content of this article is for informational purposes only and does not constitute financial advice. The information contained in this article should not be construed as an investment recommendation or a solicitation to buy or sell financial products. Financial markets are complex and involve significant risks. It is important to do your own research and consult with a qualified financial advisor before making any investment decision. The author of this article cannot be held responsible for any losses or damages of any kind that may result from the use of the information contained in this article. In particular, please note that:
- Past performance is not a guarantee of future results.
- The value of investments can fluctuate and you may lose all or part of your initial investment.
- It is important to diversify your investments to reduce your risk exposure.
- You should always invest in financial products that you understand and whose risk level you accept.
If you have any questions or concerns about the information contained in this article, please consult a qualified financial advisor.
