Most individuals aren’t born into massive amounts of wealth. Often, in order to achieve our financial goals, we have to put in lots of work. For many, achieving financial stability can feel impossible. It can be hard to imagine a life where you do not have to think about a purchase before you make one or a life where you can create a foundation for future generations. Although most of us aren’t looking for extravagant wealth, learning how to build a foundation for your family can help you in countless ways. Many of us want sustainable and long-lasting wealth that provides financial security for our families and enough money to fund the lifestyle we aspire to have.
While sometimes this may feel unattainable, achieving financial stability is far easier than you may think. That’s why we’ve created a few simple steps and lifestyle changes you can make, to start on your path to building long term wealth.
Establishing wealth can be difficult if you do not have a foundation to start from. One of the biggest misconceptions about those with financial stability is that they are making upwards of $100,000 a year. However, this couldn’t be further from the truth. A financial foundation can be built regardless of how much you make. Sometimes, starting with a plethora of money can lead to financial instability. Many people who win the lottery, gain an inheritance or receive a sudden raise, can lose it due to overspending or poor financial habits. As such, it is important to understand how to stretch your money, before you can understand how to spend it in the best way. Many people who now have long term wealth, built their foundation with hard work, and investing their time.
But how do you start building a foundation?
The first step is getting a job or striving to work full time hours. Working approximately 40 hours a week can help you start with a strong foundation. Whether you make $15 an hour or $1,500 an hour, ensuring you have a regular income is essential to building long term wealth. If your current job only offers part-time hours, it may be wise to look for a second part-time job or temp work to help increase your income.
At Plastk we are big advocates for the power of education. Whether it be a formal education at a registered college, university or high school, having a diploma of any kind is essential in today’s world. However, we understand that access to education isn’t accessible for everyone. If you have the financial means, applying to a college, university or trade school, can help you increase your finances. However, this doesn’t mean that you should spend all your savings on a university degree if you cannot afford it. Most post-secondary institutions offer the ability to take a select number of courses for a reduced course. This means you can take courses that are of interest to you or that can help you advance in your career. For example, if you are a construction worker, you may consider taking a business management or leadership course. This can help you get promoted to a construction site manager, team lead or even help you on the path towards starting your own construction company!
There are often countless free courses you can take as well. Sites like LinkedIn Learning, Grow with Google and MasterClass all offer free or low cost courses that you can take on your own schedule. Taking extra courses are great boosts to your resume and can help you advance in all aspects of your life.
Shifting your money mindset is essential to building long term wealth. You must understand your negative habits, financial situation and areas that you excel in, in order to advance yourself. Everyone has different mindsets about money. From our spending habits to the way we save, it is important to think about your attitude towards personal finances, before you begin making changes to your habits. Once you reflect on your current financial situation, you can begin taking steps towards future goals. Personal reflection is extremely important, as it will help you see what you are doing well and what you can improve upon. It is also important to remind yourself that anything is possible if you make a plan and set concrete goals for yourself to achieve.
Consumer debt is one of the biggest barriers to building wealth. This includes credit card debt, personal loans, car payments, or excessive spending. Understanding your relationship with debt and creating a sustainable plan for paying off your debt is essential to building wealth. You can not have wealth if you have debt, so paying off your debts is the first step you need to take in your personal financial journey.
Another aspect of reducing consumer debt is looking for the lowest interest rates on all your major purchases. This means ‘shopping around,’ for lower rates on rent, your car or even your credit card. The earlier you put a strong financial foundation in place and keep it there, the sooner your wealth can expand upwards.
2. Invest
It’s no secret that investing is the best way to build long term wealth. Whether you invest in the stock market, real estate, drop shipping, reselling luxury goods or something else, investing is essential to building wealth.
So how do you start investing? Last month, we explained how to invest as a beginner. Now that you understand the basics of investing, you can start putting money aside every month to excel in your investment journey.
The basics you need to know are:
Starting with small investment goals are key to expanding your financial situation. If you treat your investment account like another savings account that you put money in every month, you will see how easy it is to grow your finances. Getting started is the first step. The world of investing can be extremely daunting so starting as soon as you are able to, is essential.
One of the most important parts of investing? Diversification! Diversification means spreading your investments across different industries and companies. If you’ve ever heard the term ‘don’t put all your eggs in one basket,’ this is what diversification means.
This is important because it offers extra support and security in the event the stock market crashes, a company loses a large stake or a major shift in trends occurs. For example, if your entire investment portfolio was in Air Canada stock in January 2020, you would have lost almost everything when the pandemic hit Canada in March of 2020. If your portfolio only had a portion of Air Canada stock, you likely would have faced less of a hit, when flights were grounded. While many companies often recover to market value after massive crashes, it’s not wise to depend on this. Building wealth has its ups and downs. When one asset class falls, another one rises.
At Plastk we recommend setting up your portfolio in the following way:
The first 80% of your portfolio should be put towards
Mining, Precious metals and/or Oil - 35%
Technology - 20%
Fortune 500 Companies - 15%
Agriculture - 10%
The remaining 20% should be put towards a company you have done extensive research on. You should look at gross earnings over the past 10 years, news or press releases about the company and look into the industry, to predict growth. While each company you are looking to invest in from the industry list above, should be researched extensively, the last 20% of your portfolio can be put towards an industry you would like to support.
3.Minimize Fees
Minimizing fees in all areas of your life can help you increase your income, which in turn will build your financial foundation. This means looking for a credit card with lower interest rates or cashback/rewards, a car with low maintenance and insurance fees, an apartment with lower rent (or see if you can negotiate with your landlord) or look at your other expenses to see if there are other ways you can minimize your monthly fees.
Similarly to the above points, decreasing your expenses is essential. There are a few tips you can take towards decreasing your expenses. For example you can look for expenses that you can cut out of your life: like monthly pedicures, reducing the amount of times you order takeout, looking for cheaper versions of essential items or using a credit card that offers cash back!
The above points can help you reduce your monthly expenses, which will put more money back in your pocket.
4. Grow Career Income
If you have any type of online presence, you’ve probably heard of individuals who make thousands of dollars every month, with side hustles. While this often requires large investments, which isn’t attainable for many people, there are ways you can grow your career income, without paying large overhead fees.
Utilize Facebook Marketplace - Facebook marketplace is a great way to increase your income. While selling here can be volatile, if you sell unwanted items in your home in an efficient way, you can make a substantial profit!
Using Facebook marketplace effectively, would involve looking around your house for items you no longer need. The most popular items on the platform are: clothing, furniture, electronics and books.
As always, do your research on what the items you are selling retail for. You should be selling these products for 40-60% of their market value. Remember, try to list products for slightly higher prices than you would like to make. Many people haggle when buying products on Facebook Marketplace, so listing items at a higher price point is essential for making the most profit possible.
Use a clothing re-selling app- Apps like Depop, Poshmark or ThreadUp allow consumers to sell their old clothes. Not only is this an extremely sustainable project, but can help you make passive income. You can follow similar pricing tips as the points above, but also consider shipping fees.
Fill out Online Surveys- Filling out online surveys from sites like Asking Canadians, Survey Junkie or SwagBucks, can help you earn gift cards or cash back. While this is likely a smaller profit stream, it can help reduce your expenses.
5. Think Decades Ahead
When focusing on your long term savings, it can be easy to get discouraged. However, it is important to think about long term gains. You should think about how your time or monetary investment will pay off in the long term. While some investments may be more money in the short term, they can pay off exponentially!
6. Ignore Money Habits of Peers
When saving and spending money, it is easy to compare yourself to others. However, it is important to remember that your life is not the same as your peers. You should focus on personal development, rather than trying to follow the habits of those around you. It is likely that none of your friends will be in the same situation as you, have the same expenses or monthly income. As such, you should be tailoring your money habits towards your needs and lifestyle, rather than trying to be someone else.
Building long term wealth is all about long term time investments. The more positive energy you put into your life and finances, the better. However, by following our tips and tricks, you can set yourself and your family up for success for generations to come.
Disclaimer: The content provided on the Plastk Financial Inc. Blog is information to help Canadians become financially literate and learn about credit. Plastk is not responsible for building or ruining an individual's credit score or credit rating. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment, credit inquiries, and all other decisions should be made, as appropriate, only with guidance from a qualified professional.