A Closer Look into How You Can Automatically Build Wealth
You need to save if you really want to build wealth, and the process of saving becomes easier when it gets done automatically. How this can be possible? Let us explore the details in the following sections.
How to automatically build wealth
The main thing you will have to do to accomplish this goal is make the necessary arrangements so that certain steps automatically take place on a monthly basis and help in growing your asset base.
This way you will not have to make decisions every month, or put in extra effort to build your savings. More importantly, these measures will help in enforcing discipline so that you stay on the path of building wealth.
Let us look at some steps which would help in automatically growing your asset base.
Own a House:
Your wealth advisor may suggest that you buy a house since when you buy a house, monthly payments you make help in reducing your debt, which in turn assists in building equity.
If your home has been financed using a fully amortizing and fixed rate of interest mortgage, then over time appreciation will most likely occur due to inflation. However, you will continue repaying a certain fixed amount using depreciating currency.
More importantly, this all will happen automatically without you having to intervene in any way. Additionally, you can fix pay-off date for your mortgage to concur with retirement date. The objective here will be to reduce cash flow requirement after retirement.
Rental Real Estate:
From the above details it is quite clear that owing a house can be helpful in building wealth. It would be even better if some other person will be making the payments on your behalf in the form of rent. However, you will have to ensure that the property you want to rent maintains a safety margin in the form of good cash flow. Thus, by owing this type of property you will be able to build your wealth even further.
Tax Deferred Retirement Plans:
You need to discuss the viability of such plans with your wealth advisor. The main idea here is to maximize contributions towards such plans as money will get automatically deducted from your paycheck before you can use it. If there is a savings match program offered by employer then it will turn out to be even better.
Let us look at an example of how a tax differed retirement plan could be beneficial for you.
Suppose you are earning $50,000 per year and a 401(k) is offered by your company, with half a dollar matched savings to a maximum of six percent of your salary.
In this situation, if you make a contribution of only about $3,000 every year (or $250 each month) and you will be receiving another $1,500 from your company, which will be an excellent way of building an asset base.
The Bottom Line
To summarize we can say that by consulting a wealth advisor and keeping note of the above mentioned methods, you can automatically build wealth on a steady basis.