Searching online will reveal an array of secrets to building wealth, with tips, tricks, and “fast hacks,” abound. Regardless of what someone is starting with or what their experience has been like thus far, many of these so-called “tricks” are just that and they will never yield true results.
However, there are others that have some merit. Unfortunately, there are also downsides to diving into a tactic a person has only briefly researched online. Doing this may result in no effective growth, or -; even worse -; losing money rather than earning it.
According to the experts, including Brown Smith Wallace, to build wealth, it’s important to learn what some of the most effective strategies are. Keep reading to learn about some of the most popular and used methods for wealth building.
- Rental Properties
To most people, rental properties seem like a pretty easy way to build a little extra income. They are also responsible for up to 90 percent of all self-made millionaires’ wealth today. The idea here is to purchase a few properties for a fair rate, charge a certain amount of rent that’s slightly higher than what is paid for mortgage payments, insurance, repairs, and taxes, and eventually create a steady source of equity that can be sold for profits in the future.
What many wonder is: what’s the issue? To begin with, many new property investors wind up underestimating their costs. While the property owner is charging rent that is higher than their mortgage payment, many don’t consider emergency repair issues, ongoing maintenance, and extended gaps between renters.
Also, managing property will require more time than many people think it does. As a landlord, a person is legally responsible for safety inspections, repairs, utility availability, code compliance, and more. An individual needs to consider if the investment is worth the money.
- Trading Stocks
A popular method of building wealth is by trading stocks. This wealth-building method has an average return that’s adjusted for inflation at approximately seven percent. The concept here is to purchase small stakes in promising or big companies and benefit when the prices of the purchased shares go up.
There are a few issues with this strategy. For those who don’t know too much about the stocks being traded, they are bound to be on the losing side of this deal. No one can pick up randomly and just hope they will see a positive return.
Also, if someone trades too often, it will cost them big in fees and may reduce the possibility of a decent return. However, there is also the possibility the stock market may crash or there could be a correction that results in a temporary setback.
- Begin a Business Based on a Hobby
For many people, this is considered “living the dream.” Most people love what they do, so it is only natural to consider making money while doing it. For example, a person who loves to make crafts may want to think about selling these items on sites like Etsy. They may also opt to start their own blog and build an audience that will pay for content. This seems like a smart and effective way to build a stream of passive income, right?
However, starting a new business is something that is much more challenging than most realize. It isn’t enough to just start selling what is being made. It’s important to know the target audience, study the competition, and find a way to make the individual’s efforts profitable. Additionally, if a person gets sucked into their “hobby” as a business, they may lose interest and something they enjoyed becomes a chore.
- Reselling Services or Goods
There are more than a few individuals and companies producing goods and selling their services. As a result, many people may try to jump on the bandwagon of buying these items up and then selling them at a slightly higher price point. There’s not much work involved with this, and it’s possible to make money.
While this strategy can work -; just like all the others listed here -; it is not as simple and straightforward as it may seem. If a person charges too much, no one is going to buy the item. If they don’t charge enough, they won’t make enough money to justify the efforts that have been put into this. Unfortunately, when it comes to the reseller market, the competition is so tight in most areas that there isn’t too much wiggle room when it comes to prices, especially for those who are new to the “game.”
Forging a Path
Each strategy listed here comes with certain issues. While this is true, they can also be effective when the right circumstances are present. As a person moves forward, regardless of the strategies used, there are a few things that can help.
Research is essential. It’s necessary to research everything carefully. Be sure to exhaust all resources to learn more about the potential benefits and drawbacks, along with possible quirks of each month that is selected. After all, as the saying goes -; knowing is half the battle.
It’s also important to be willing to diversify efforts. Don’t put all the person’s assets into a single strategy. If someone does this, it may lead to catastrophic losses if things do happen to go wrong. A better option is to diversify. This means trying out several things for building wealth.
Not one is going to find success if they aren’t willing to make a personal investment in whatever it is, they choose to do. Take some time to learn about what is being done, get experience, and learn something new. Take time to meet more people. It is these personal developments that will help make an individual more valuable, regardless of the other investments being made.
As long as someone takes time to figure out what they are getting into and as long as they avoid putting all their eggs in just one basket, they will be able to find success with the strategies here. Building wealth may not be easy, but it is possible.
Image Credits: Philip Veater