2021 has taught us that the topic of growing wealth attracts many people who wish to achieve it as a financial goal. Often they are faced with countless resources out there, some of which are either too generic, not subjective to the particular situation or a blatant "get rich quick" scheme. By now, everyone should understand that while growing wealth needs to be practical and straightforward, it also needs consistency and discipline.
Some of the most popular ideas to grow wealth include having an emergency fund, cutting down expenses, and investing money. While they are genuinely good tips, details are always left out, and it often seems ignorant in certain situations. Wealth is very subjective, and hence the recommendations should also be relevant to the individual. Here, we discuss 3 simple and yet sensible steps to grow your wealth in 2021:
People often throw financial advice and suggestions ignorant to the individual's circumstances. Someone who keeps receiving the same recommendation to set up an emergency fund may not even have an income source, or if he/she does, it is not sufficient to save after all the mandatory expenses. It comes off very insensitive to the needs of that individual. With rising costs and dependency on debt out of necessity, many are living off paycheck to paycheck and thus, cannot afford to have one. Setting a financial goal and priority should depend on the particular circumstances and not based on some standardized checking list.
Setting a priority is and establishing a financial goal are two different things. A priority should list the things that need to be done first, depending on the circumstances, to achieve a goal. For instance, someone requiring an emergency fund needs an income source or increasing the income if the current job does not provide sufficiently. That means the individual needs to focus on finding a job or a job that pays better and provides benefits. Here, he/she may require additional qualifications necessary for that job title. The role requiring extra qualifications may set the individual on the path to investing his money in getting an extra set of skills. Therefore, it is setting an emergency fund that is the financial goal. Establishing an income source or increasing current income through acquiring additional qualification becomes a financial priority to achieve that goal.
Similarly, someone who has fulfilled the primary financial goals (for example, paying all debts, having liquid savings and even maxing pension contributions every year) may want to set another goal, for which there are different priorities. At this point, his goal could be to have a stable home, for which his priorities should be to collecting down payment and grow his financial background to show the bank some credibility. Or he may want to establish a business for which his priorities would be to secure capital. At the end of the journey, the individual priorities set the person on the correct path to achieve his goals, which, in turn, facilitates his wealth growth.
Setting a goal and seems pretty straightforward but following through is difficult as it can get, especially if the goal is an open-ended one. The priorities will become muddied if one does not look at the bigger picture behind the goal. For instance, many prefer wealth growth through investing money and owning a business in addition to having a full-time job on the side to have certain financial benefits (e.g. health insurance). Someone may have all the capital they need to both invest in stocks and create their own business and quit the job in the long run. The goal is to grow their money, and the priority is to keep the job for the benefits; hence he decides to invest 10K in stocks and puts 15K to create his business. Of course, by no means this approach is wrong. His wealth growth through investment will be stable, but it will be slow over the long term, and the business will take years to develop and start producing a steady income. Here, he needs to look at the bigger picture.
If his goal is to set his business and leave his job in the long-term, the individual could grow his wealth significantly a lot quicker if he focused on establishing his business and putting all the money there. He would also need to give the company more of his time, which means it could interfere with his full-time job - a risk he could be willing to take.
On the other hand, if he does not want to retire early and still want to keep his employment benefits and have more time for his personal life, he could just invest his money in stocks and wait for it to grow slowly but consistently over time.
The aim of wealth growth should be what you are looking for in the long run.
Many people choose to grow their wealth by creating multiple streams of income - a popular subject that also attracts many fans. People choose to take up various additional work to supplement their primary income if they have one. The side-jobs could be permanent freelance work, temporary gigs, or even having several small businesses simultaneously. However, it is not to be confused with passive income since side-jobs require active work on the individual's behalf. Passive income can be rental income or stock dividends that does not require additional work.
Having multiple income streams is a genuinely good way to have extra income and for wealth growth. However, there are significant drawbacks if it is not done the right way. The individual needs to see the bigger picture behind his goals and priorities and decide what he should really focus on.
Having multiple side-work will affect the performance of full-time jobs if you have one, which is especially important for people who need benefits, such as insurance. It can also lead to work burnout, which is very real.
This is why you can and should only focus on a few jobs that you are confident about bringing income. It is better to refrain from having multiple jobs that do not correlate with each other. For example, a lawyer may undertake freelance legal writing because the side-job coincides with the primary position. This is because the lawyer is learning from the job and updating the skills from doing additional legal work on the side, which requires more studying. The lawyer becomes more specialized in the area and uses the experience to charge clients more since he now has more skills and knowledge than the average lawyer.
The goal here is to diversify income between a primary job and additional work. The priority should be its management and still giving yourself time to rest.
Growing wealth should not be a topic for people to feel alienated. Although it is a financial topic, the discussion around it should be more inclusive and relatable. Hence we took the time to research and write to reach a wider audience of all kinds, hoping they could benefit from it.
Last update: 29/03/2021