Everyone Deserves Independent Wealth: Here are Four Ways to Achieve it
Statistics Canada states that the average net worth of the top 20% of families sorted by income group rose by an average of 80% between 1999 and 2012, compared with a gain of 38% among the bottom 5th of society.
Retire early, live free - these things cannot be attained just by luck, genius or special connections. You don't just attend overpriced weekend financial seminars, or learn the latest tricks, and gimmicks sold by slick marketers. The truth behind building independent wealth is public knowledge - simple to understand, and nobody is going to get rich selling it to you. In fact, you deserve independent wealth - you just have to know what to do.
A frequent issue for many when it comes to building wealth is the barrier that they don't feel they "deserve it," or they aren't good enough. This type of obstacle can make us blind to financial opportunity simply because we don't believe it applies to us. People often become blinded or feel inept about the idea of investment and may also think it is risky. This is a nature that I call emotional practicality - forget your fears and insecurities about money and focus on positivity. This positivity can help you break free and begin to learn about how to build the wealth that you deserve.
"Don't overestimate what you can build in 12-24 months, don't underestimate 5 years."
Here are a few steps for you to consider:
1. Start Spending Less and Owning More
We are habitual. Do you drink coffee at Starbucks every day, maybe even twice a day? Maybe go on a vacation twice a year. There's nothing wrong with enjoying yourself, but you might begin to realize that you are spending more than you make and you might want to reflect on some of your spending habits.
How you manage, spend and invest your money can have a profound impact on your life and your ability to build independent wealth. Beneath all the software and the budgets, there are a few rules that will always help to improve your wealth:
- Spend less than you earn - This allows you the financial ability to save for the future, deal with inevitable crisis. The bigger the gap between your income, the better.
- Always plan for your financial future - This doesn't mean retirement. When a store offers to let you pay off some gadget in 6 months with no interest. You need to know that you can pay it off, or avoid that deal. Establishing an emergency fund will allow you to deal with those unexpected repairs.
- Get your money to work for you - Everyone assumes that you should save or spend your money, but building independent wealth means making your money work for you. Each dollar you invest in a high yield property, means your money is growing in value. You need to consider how best to utilize each dollar, where you will get the highest return with the lowest risk.
- Own More Property - Cashflow properties and your own residence, make great investments. When you buy a stock, the only way you can make money is if the stock appreciates in value, and you sell it at the right moment. With real estate you can make money in many ways: rental income, appreciation, adding value, and leverage. How much you profit from real estate depends on you. What makes real estate different, is that it is a tangible investment - when most other markets tank , real estate can continue to bring you a return on your investment.
2. Build Surplus Funds to Invest
There is less risk in real estate leverage, than in stock leverage
Now that you have built surplus of funds, it's hard to not immediately start thinking about all of the things you would like to purchase. Remember the other adage of extra money burning a hole in your pocket - you just need to reverse the psychology and think about utilizing that surplus and putting the money to work for you.
Instead of asking, how can I spend this extra money? Consider investing it as quickly as possible - your wallet will thank you for it. Investing in real estate is one of the best things you can do, here are a number of things to consider:
- Rental Income - Buying a cash flow asset means you can rent out the property and maintain an income. This income will be a consistent fund that continually puts money in the bank.
- Appreciation - Remember that appreciation is the rise of property value: this increases your equity, by taking the value of a property and deducting the amount left on the mortgage. That's why it's important to consider what activities will increase the equity of your home - renovations, doubling down on your mortgage, purchasing a property in an up and coming area. All of these activities can increase the value of your equity and it's important to consider what will give you the highest impact.
- Leverage - Leverage or debt financing is an important and even necessary part of most real estate deals. Too much leverage on an asset, can be a recipe for heavy losses. So, it's important for investors to understand leverage, the pros and cons of using it, what amount is prudent in a situation and how to influence the risk or reward of real estate.
When you buy a property, you fix the price, and if you are renting, you will have an increase in rent, which pays down the mortgage and gives you a profit. Hence you have created a leverage of increasing returns. That's why it's important to have the right investment team to ensure that your property is optimized to increase your returns against the leverage of your mortgage.
Real Estate makes sense because once you've improved your cash flow, you likely encounter a lovely problem: a cash surplus for further investment.
3. Don't Invest in Depreciating Assets.
Remember this - if it floats, drives, or flies - lease it. That means cars, boats, planes - basically anything that is a lost gain, should be leased.
Here is one example - one we take close to heart - property purchases. These are an example of an asset that actually increases in value. If you invest in real estate and/or commercial property and it appreciates due to an increase in demand in the region, or values grow because of new infrastructure, then you can begin to see how an asset's value increases.
Many investors will buy poorer assets - potentially it could be a property that needs some extra assistance to create more value. Long vacancies, environmentally contaminated and require substantial investment. These investors bring special knowledge or skills to the asset to substantially increase value.
4. Niche Markets aren't Glamorous - They are Lucrative
Vancouver's real estate industry is considered a niche market where new investors are hedging their bets on a fragile financial ecosystem. This mindset also needs to change - you need to look at where you are going to invest - what is your specialty going to be? Let's say you decide to invest in multifamily - what makes these properties special? What things do you have to consider? With questions come answers, and that is part of the fun in building independent wealth - it's a journey towards discovering what type of investor you are and what market will be niche in your eyes.
Risk, danger, pressure, unique gift, special insight - how do these values get in the way of me making the leap towards independent wealth? The answer is simple - it comes down to changing your mindset and being strategic. If you learn a bit, change some habits, and look into new avenues, you begin to see the pattern and develop your plan for investing the right way. Just remember to get in contact with an industry leading team of specialists who can guide you into these markets and help you make the right decision. Everyone deserves independent wealth - you just have to be willing to work for it.
Often advice or information will provide more questions, and these questions need answers. Our industry-leading success is attributed to our knowledgeable agents - who are supported by a business development and marketing communications team and our unique technology that enables us to go above and beyond for each client. As a result, we are grateful to be recognized as the #1 brokerage group in Vancouver and #14 Canada, for Royal LePage nationally.