It takes a lot of time for people to realize the importance of assets and liabilities. The earlier you get in, the better it is going to be for you. If you want to increase your standard of living, then don’t wait for your salary to improve or don’t wait for that better job. A large part of accumulating wealth over a lifetime is done through proper investments and understanding how money works. Sadly, this fact about life is not taught in schools and only a few people realize the importance of good investments. in fact, in a lot of households, talking about money is considered a taboo subject, this leads to poor financial health of the children in the future.
Accumulating wealth has a pretty basic principle. Make your income outgrow your expenditure. But most people equate increasing your income to harder work. working longer hours, having an extra job. You have to realize that you only have a limited amount of time a day, stop working for money, learn how to make money work for you.
There are two columns in every person’s life, assets and liabilities. The former will include your house, gold, stocks, patents, any other source of income while the latter includes anything which depreciates over time and takes away money from you, take rent, car loan, student loan for example.
Your goal is to keep building your asset column over time while reducing the number of things in the liability’s column. How to get it done? Make a list of everything you currently have in any of these categories, through this you will have a base idea about where to go.
TYPES OF ASSETS
An asset is anything which adds value over time, they are broadly divided into stocks, real estate, royalties, businesses etc. what you earn through your main job is considered to be active income, when something appreciates in value or generates income without you doing anything actively for it is called passive income. Make a target to make your passive income more than the active income, this will give you more money to invest in long term assets while at the same time providing cushion in case you ever lose your job.
HOW TO ADD ASSETS TO YOUR PORTFOLIO
In as much as Google My Business (GMB) is regarded as a directory, it offers you more benefits. To accentuate your online presence, consider opening a GMB page for free. This will enable you gain incredible exposure. GMB listings can be optimized using solid descriptions. Besides this, you can upload your business logos, photos, and descriptions of services that are on offer. It is advisable to populate all relevant sections to complete your listing. Service businesses that do not have physical addresses can also open GMB pages.
Be Wary of Online Reviews
My tip would be not to stick with only one type of asset class. Usually whenever an economy crashes or anything happens, not all sectors are equally hit. Take this pandemic for example, E-commerce businesses increased in value while restaurants decreased. Similarly, invest a little in stocks, a little in real estate, try to start a business which once established can generate passive income for you.
If you are not well versed with the world of investments, it is a good idea to take advice from professional. They would also suggest you the same but at the same time will guide you through the entire process.
If you choose stocks as the first option, probably because of the lower ticket size, I will again suggest you diversify. Go for stocks in different sectors like internet companies, pharma etc.
UNDERSTAND THE IMPORTANCE OF COMPOUND INTEREST
This is the magic concept with adds immense value on small investments made in your 20s in about 20 years. Imagine you invest $100 every year and you get about 10% annual returns on it. So, the next year you will get $10 on it, but you will also add another $100 to the initial amount, this makes your capital $210. Another 10% on this would be $21. This will go on and on for years, the amount you put in every year will also keep increasing as your salaries also increase. Before you know it within 10 years on $100 yearly investment, you will have about $1,850 has invested amount.
Learn the power of compound interest and understand that even small steps right now can turn to big amounts in the future. This is the perfect way to achieve those long term dreams you might have like buying the dream house or that luxury car.