When a person wants to become wealthy, they usually focus on earning more income. And while a significant income is certainly one part of the puzzle, it shouldn't be the primary focus of your wealth management plan. In fact, for most Americans, even a high-earning job has its earning power limits. On the other hand, growing your wealth has no limits. How can you make growth a priority? Here are five ways.
1. Reduce Debt
The less money you must put toward debt, the more you can put into income- or interest-earning options. But even high earners can become trapped in a cycle of holding too much debt that limits their overall growth potential. Look at your debt load and determine what may be good debt that allows you to earn and what is bad debt that costs more than it brings in. Eliminate the second variety.
2. Calculate Your Net Worth
One of the best ways to know if you are indeed growing your wealth is to calculate your net worth. This is a fairly simple equation. Add up all your assets and subtract all your liabilities (debts). The result is what your finances are really worth. This number should consistently rise over time. Because net worth focuses on assets rather than income, it provides a more sustainable picture.
3. Look for Alternative Income
A consistent goal should be to locate passive and alternative sources of income as you go through life. This allows you to boost income without working more. One of the most common is buying and maintaining rental property to provide steady rent income on the side. You may also find passive income in things like mineral or rights investments, turning a creative hobby into a small enterprise, or investing in a quality business partnership.
4. Strategize Growth and Earnings
Your investment portfolio should have a solid mix of growth stocks and earnings stocks. Investments that pay high interest and dividends provide the mechanism to put more into stocks with higher long-term growth potential. By funding the latter with the reinvestment of the former, your investments grow faster with less contribution by you.
5. Consult With a Professional
If you really want to focus on growth, you may need help figuring out a strategy that's personalized to your situation. This is where a wealth management specialist comes into play. They can help you find direction, choose investments, find weak points in your plan, and learn about options you may not know on your own.
Changing your priorities from getting a bigger paycheck to actually growing wealth requires a mindset change. The best help with this is a qualified financial planner. Don't have one yet? Make an appointment to meet one in your area today. They can give you more information on wealth management planning and other financial tools.