There’s a difference between building wealth and being rich. Building wealth takes time. It requires you to be both patient and opportunistic. In addition you also need to avoid common mistakes that will derail you on your journey. That said, avoid these four money mistakes if you want to build wealth:
Solely Depending on Your Salary
The golden rule of building wealth is that you need to create multiple income streams. If you depend solely on your salary for income then you’re capping your potential earnings. You need to create passive income streams.
Real estate, for example, is a great way to create a passive income stream. If you aren’t keen on buying property you can take a look at these 11 ways you can make money while sleeping. Choose one that fits your schedule and skill set and start building. If you take on too much at once you’ll end up spending time with little return.
Blindly Trusting Others
One of the biggest money mistakes you can make is blindly trusting another person’s advice. It’s easy to put your faith in others who have succeeded before you. That said, investing is very risky and there’s no such thing as a 100% guarantee (generally speaking).
I started trading stocks when I was 11 years old. I remember reading an article online about how Warren Buffet made an investment in a clean energy company. The article went on to talk about how Buffet was confident in that specific company. I invested without doing any research of my own and lost everything. Investors like Warren Buffet may have amazing track records, but they make mistakes too. Never blindly trust someone regardless of their stature. Always do your own research and make well informed decisions.
Sticking to Savings Accounts
To be brutally honest, you can’t build wealth just by saving. More specifically savings accounts simply don’t provide enough returns. Most banks offer 0.25% annual returns on money in your savings account. That means it’ll take you 40 years to increase your money by 10%!
I’m not sure about you but 10% in 40 years is not going to cut it. If you want to get wealthy you need to get out of your comfort zone and put your money to work.
I use my investment account as my savings account. Once the money is moved into that account I am very disciplined around leaving it there. If you do proper research and develop an investment strategy I can almost guarantee you’ll make more than 0.25% annual returns on your money.
Most successful business people will tell you to never put all your eggs in one basket. For the most part it’s true but you need to take it with a grain of salt. If you want to master something you need to put the time in. Let’s take real estate for example. In order to become a true real estate mogul you need to take the time to learn everything you can about that industry.
Try not to spread yourself too thin when it comes to your knowledge and or skills. Remember you can always diversify your investments within a specific portfolio. Diversification doesn’t mean you should invest in every industry and or opportunity. Learn everything you can about a specific space and take a leap.
As I mentioned above building wealth takes time. There’s no such thing as get rich quick and there’s most definitely no such thing as get wealthy quick. If you want to stay the course, make sure you avoid the four money mistakes listed above.