5 Most Popular Ways People Build Wealth
Do you feel wealthy? According to a recent survey by LendingTree, only 21% of Americans currently see themselves as wealthy, and only 38% who don’t see themselves as wealthy believe they ever will be.
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But building wealth has a proven formula, and here are the five most popular ways that people build wealth, as well as the steps you can take to build wealth.
1. Owning a Home
Homeownership remains the No. 1 wealth builder in America, and for good reason. According to the survey, 36% of respondents own a home, making it the most popular wealth-building strategy.
As you pay down your mortgage, you’re steadily building equity, which is the value of your home minus what you owe. Over time, that equity can grow through rising property values and debt reduction.
But buying a home is probably the biggest financial decision of your life, and it takes some time to save up enough to get there. Here are a few steps you can take right now to prepare yourself for building wealth through homeownership:
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Check your credit score and pay down high-interest debt (before applying for a mortgage).
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Save for at least a 10% to 20% down payment to avoid expensive private mortgage insurance (PMI).
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Aim for a mortgage payment under 25% to 30% of your monthly income when researching homes in your price range.
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Start saving your down payment in a high-yield savings account to earn interest while you save.
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2. Saving for Retirement
Saving for retirement is one of the simplest paths to building wealth, and 33% of respondents are utilizing that strategy. Putting money away on a regular basis in tax-advantaged retirement accounts allows you to take advantage of compound interest and lower your taxes at the same time.
Here are a few steps you can take to start building your retirement portfolio so that you can have real wealth later:
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If your employer offers a 401(k) match, contribute at least enough to get the full match (typically a percentage of your salary). This is literally free money.
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Open a Roth IRA and contribute up to $7,000 per year (or $8,000 if you’re 50 or older).
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Automate your contributions so you’re investing consistently every time you get paid.
3. Putting Money in an Online Savings Account
Saving money can help you feel more financially free and is an important first step when you’re trying to build wealth. The best place to put your savings is a high-yield savings account, and 29% of respondents are utilizing this strategy.
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