Wealth is an aspiration for many of us, but very few actually take the steps to build lasting success. It’s not just about a huge paycheck or winning the lottery, true wealth comes from your mindset, discipline and strategy. Anyone can achieve financial freedom and peace of mind with the right habits, so what are the 4 key wealth builders?
There are four key pillars to building wealth, whether you’re starting from scratch or taking your current finances to the next level:
- Save: Build the foundation.
- Invest: Grow your money over time.
- Create Good Financial Habits: Stay consistent.
- Take Calculated Risks: Find new opportunities.
Mastering these principles is the key to building wealth and finding financial freedom.
In this blog, we’ll run through each of these financial wealth builders in more detail and help you put them into action, no matter who you are.
1. Save
Saving is the foundation of your path to building wealth. Before you can use investments and calculated risks to grow your money, you need to build a safety net to protect you from unexpected costs and keep you secure while you work towards your money goals.
Begin With An Emergency Fund
An emergency fund should be your first savings goal on your journey to financial freedom. It involves setting aside money to cover any unexpected costs without going into debt. It’s typically a good idea to save around three to six months worth of living expenses, giving you peace of mind during difficult times.
An emergency fund can save the day in a number of scenarios, including:
- Car Repairs: Car problems, like a flat tire, dead battery, or major engine issue, often come without warning and with a large bill.
- Home Repairs: These are often necessary repairs to keep you safe, comfortable, and healthy in your own home. For example, you may need to fix a leak, repair electrical issues, or restore the heating to your home.
- Replacing Appliances: When key appliances, like your oven, fridge, or washing machine, stop working, you’ll want to fix them as soon as possible without impacting your financial freedom.
- Job Loss: Not only do you need money to replace your lost income, you’ll also need to cover expenses associated with searching for a new job. This might include travel to interviews, purchasing a uniform, or even relocating if necessary.
- Unexpected Travel: We can’t always anticipate travelling to look after an ill family member, for example, and last minute travel can be expensive. The situation might be stressful enough, so it’s important that you can travel without hesitation.
Emergency funds help you to avoid a reliance on borrowing money or simply delaying fixes until they cost even more. You’ll also be able to handle these situations without derailing any future financial plans.
The ‘Pay Yourself First’ Strategy
This strategy involves treating saving like a non-negotiable expense, exactly like your rent, mortgage or bills. Every month, set up an automatic movement of a portion of your income, putting it straight into a savings account as soon as you get paid.
Even if it’s not a huge amount, using the ‘pay yourself first’ strategy can help you to consistently add to your savings without any effort.
Set Clear Goals
Saving is much easier when you have a goal in mind. Whether you’re saving for a house deposit, a luxury holiday, or even a future business venture, having specific goals make it so much easier to stay motivated. By tracking your progress towards your goal amount, you have something to work towards and, often, it can help you avoid dipping into these savings for impulsive purchases.
Cut Costs, But Live Freely
This wealth builder is important, but it doesn’t mean you have to sacrifice your quality of life and the things that make you happy. Try reducing your expenses by:
- Cancelling unused subscriptions.
- Cooking at home more often, rather than going out.
- Shopping with a list to help you avoid impulse buys.
- Talking to your providers and finding better deals for things like your internet or television packages.
Think about where you can reduce costs, even if you can’t cut them out completely. These small changes can add up over time, and can give you freedom to spend more in other areas of your life.
2. Invest
Once you’ve built a solid foundation with your savings, it’s time to make your money work for you. Investing grows your cash, and is one of the most powerful long-term financial wealth builders. Your options for investing might include:
- Pensions.
- Shares.
- Bonds.
- ISAs.
Regular Contributions
No matter how you choose to invest, you don’t have to have a huge lump sum to get started. Regular monthly contributions, from as little as £50, can help you grow your money over time.
Diversify Your Investments
By spreading your investments over various sectors and asset classes, you can reduce the risk involved with investing. The key is to not choose one method and put all of your money into it. Think about your goals, your age, and how soon you need the money, especially when considering how much risk to take.
Stay Consistent
Investing, like many financial wealth builders, requires patience. Markets will rise and fall, but staying invested can often be more effective than trying to jump in and out.
The world of investing can be intimidating and you may not know where to start. STARTrading offers a number of swing trading courses, perfect for beginners. Our helpful team will guide you through the process, with expert tips to really help you understand investing.
Get in touch with STARTrading today and kickstart your journey to financial freedom!
3. Create Good Financial Habits
Wealth isn’t built overnight and you’ll need to form consistent, intentional habits over time. They’ll help you to stay in control of your money, avoid costly mistakes, and continue to make steady progress towards your goals.
Track Your Spending
To build good financial habits, you’ll first need to know where your money goes. Track everything you spend over one month and you’ll probably be surprised at how much you spend on eating out, subscriptions, or impulse purchases.
There are plenty of budgeting apps available that can connect to your bank and offer a breakdown of your spending. Once you can see your spending habits clearly, you can make informed decisions about where you can cut costs.
Stick To A Budget
Realistic budgets aren’t designed to place restrictions on your life, they’re a plan for how you’d like to use your money and reach your goals. For example, the 50/30/20 rule is a popular budgeting framework:
- 50% For Needs: e.g. rent, bills, food, mortgage payments.
- 30% For Wants: e.g. entertainment, eating out, clothing.
- 20% For Savings: e.g. debt repayment, building an emergency fund.
You can, and should, tailor your budget to fit your life. Adjust it if your circumstances change, but the key is consistency. Even if you just have a rough budget, sticking to it helps you be aware of your spending and keep control of it.
Avoid Lifestyle Creep
If your income grows, it’s easy to fall into the trap of upgrading everything. Nicer clothes, a better car, and expensive holidays are nice, but this lifestyle inflation can bring you a step back in your journey towards wealth.
Aim to keep your living costs relatively stable if your income increases, and put the extra money aside to contribute to savings, investments, or long-term goals.
Use Credit Responsibly
Credit isn’t always bad, you just need to avoid misusing it. You can still be financially stable and build your credit score by:
- Paying off your credit card in full, every month.
- Keep credit use low.
- Avoid any unnecessary borrowing.
Good credit can help you access lower interest rates on things like mortgages when you need them, but make sure you’re not putting yourself in a bad financial position where the debt continues to build.
Reflect Regularly
Try setting one day aside every month to review your finances. Check if you’re sticking to your budget, rethink the amount of money you’re investing or saving, and check in on your progress towards financial goals.
Regular check-ins can catch small problems before they snowball and can remind you about what you’re aiming for in the first place – financial freedom.
4. Take Calculated Risks
Calculated risks are financial wealth builders that are often less discussed. Wealth acceleration often happens when you take informed steps, compared to the steady growth of savings and investments. Calculated risks may include:
- Switching careers.
- Starting a business.
- Investing in higher-risk opportunities.
The goal with this step isn’t to gamble with your money, it’s about making strategic decisions that could jumpstart your financial life.
Understanding Risk vs Recklessness
You don’t have to act impulsively or invest in trending cryptocurrency to take calculated risks. You’ll need to assess both the rewards and downsides of each approach and prepare accordingly.
When considering risk, it’s important to ask yourself:
- What’s the worst-case scenario?
- Can I afford to lose this time, energy, or money?
- If this doesn’t work out, what can you learn or gain from it?
Career And Business Opportunities
Your income is an extremely powerful wealth-building tool. Taking career risks can help increase your earning potential over time and there are a number of risks that often pay off, like:
- Moving into freelance or self-employed work.
- Upskilling through a professional qualification.
- Moving to a new area for better job opportunities.
- Starting a passion project that could have earning potential in the future.
Overcoming Fear Of Failure
Many people avoid risks because they fear losing out on something, judgement from others, or making mistakes. These mistakes are often part of the process, and it’s important that you learn, adapt, and try again.
Try launching a side hustle with small upfront costs, or take a class to learn a higher-paying skill. You don’t have to jump in head first, but don’t avoid making progress just in case it doesn’t work out.
Protect Yourself
As we covered above, risk doesn’t always mean recklessness. You can still make bold moves, while protecting your current financial health.
- Keep your emergency fund intact.
- Don’t risk money that you can’t afford to lose.
- Make sure you have adequate insurance in place.
- Make sure only a small portion of your investment portfolio is high-risk.
Smart, intentional risks can often take you from steady growth to life-changing progress, especially when backed by good habits.
Building Wealth With STARTrading
Building wealth isn’t about luck or secret tricks, it’s about doing the right things consistently and making informed decisions. By focusing on these four pillars, you can lay the foundation for a secure financial future.
Investing is just one part of the key things you’ll need to build wealth, but it can be intimidating. Whether you’re entirely new to trading, or want to learn more after some unsuccessful attempts, the team at STARTrading are here to help.
We’ll support you in achieving your life goals and feel more fulfilled. Make time for the things that truly matter to you, like friends, family, travel, and hobbies, and get started with a STARTrading online trading course today.
