High-net-worth individuals who grew their wealth strategically from a small nest egg often did so by developing smart financial habits that are wise to be emulated by everybody, no matter their starting level of wealth, writes Forbes Finance Council for Forbes.
Not Keeping Money Lying Dormant
Building true wealth requires not leaving money sitting idle. To reach the levels of truly wealthy individuals, you need to have money working for you at all times.
Avoiding Paying Interest
People who end up paying high interest rates over the long term end up paying double or even triple the value of the acquired sale item. Whenever possible, do not pay interest.
Monitoring Sources of Income and Expenses
An important practice is to consistently monitor sources of income and expenses and ensure that there is enough money left over to build wealth through savings and investment.
Strategic Use of Insurance
Wealthy individuals do not use insurance solely to replace lost income during their working years, but utilize it as part of their estate planning and tax strategy.
To build wealth, it is paramount to consistently invest money that is comfortable for your circumstances. Habit and consistency are of key importance, which can be helped by automating deposits directly from your earnings into your investment account.
Financial Knowledge and Skills
It is advisable to focus on acquiring the right financial skills and continue developing financial knowledge.
Take Educated Risks
Not being afraid to take educated risks – all within your risk tolerance – in both business and investments is a good way to grow your wealth. However, it is key to do proper research and to work with and take advice from people who can take you to the next level and make sure you are making an informed decision.
Fred Hubler, Chief Wealth Strategist for Creative Capital Wealth Management Group, a Phoenixville firm offering retainer-based advice and access to alternative investment strategies, has one more to add. “Leverage your ability to add subject matter experts and build a team of these experts,” Hubler advises. “As you acquire more money,’ says Hubler, “there are more distractions and more options to make bad decisions, that is why we are slow to add new strategies to our playbook and when we do it’s because we have done our due diligence and know when who how to use the investment or strategy of our clients.”
Read more about smart financial habits in Forbes.
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