Achieve More Wealth by Creating Financial Goals
Setting a clearly defined and timely goal will help you achieve your desired level of wealth. Once you achieve one goal, reassess and set the bar higher. You'll be on your way to financial success in no time.
1. What is your idea of wealth? Your idea of wealth will change as you earn more money. That’s why it’s vital to set goals along the way. What do you want your net worth to be in 5 years, in 10 years and in 20 years? How comfortably or lavishly would you like to live, and what will it take to get there?
2. Write down your short-term and long-term goals. Once you have determined your goals, write them down. The SMART goal-setting format can help ensure that you're detailed enough to turn a seed of a plan in your head into reality. This is the first step towards getting your desires out of your mind and into motion and it will be easier to refer to them later on. Hold yourself accountable to regular review periods so that you can make the necessary adjustments to existing spending or saving habits.
3. Develop a budget to help you reach these goals. A budget not only helps you understand where your money goes each month, it may also prevent you from overspending without thinking. Automating your savings can play a huge role, as well as using online tracking tools that can effectively record everything in one place. That way you can have more money to save and invest.
$ Income Earned + $ Investments = $ Total Income
$ Total Income - $ Daily Expenses - $ Monthly Bills = $ Total Available for Investment
To increase the amount you can invest, make adjustments to your daily spending and monthly bills, if possible. Look for opportunities to save money and transfer those savings into your accounts.
Purchase Investment Property
Investment properties provide passive income to your growing financial portfolio. More than 25 percent of Americans say real estate is the best way to invest money you may not need for the next 10 years. While many people flip houses to make money—that is, they buy a home at a low price, fix it up and sell it quickly—others purchase multifamily properties to create monthly cash flow to save or to reinvest in other properties.
The longer you own a property, the better investment it becomes as you’ll continue to build equity. While rental costs rise with inflation, your mortgage will remain the same. The best part? Once you pay off the mortgage, your cash flow will increase. Remember to create a budget for maintenance each month, between 10 to 20 percent of the rent you receive, or more if the home is older. This will help you save more money in the long run and allow you to prepare for unexpected repairs.
There are tax benefits to owning investment property as well. You may be able to claim deductions for depreciation, as long as it fits within the guidelines; repairs, travel expenses, interest and more. If you’re thinking of purchasing investment property, talk to your tax professional to get the details.
It’s never too late to begin planning for and building your wealth, particularly passive income.
Sources: 1. BankRate.com
2. Pulsenomics, Home Price Expectation Survey Q4 2016
3. Statistic Brain, August 1, 2016
4. National Association of REALTORS, Economists’ Outlook, September 8, 2014
5. The Motley Fool, July 30, 2016