Wealth building – The 3 building blocks of wealth growth
When it comes to building wealth, it is important to understand where you see yourself now and where you want to realistically be in the future. Are you an aspiring millionaire or content with a comfortable lifestyle and health retirement pot?
To one person, wealth may mean having millions sitting in your bank account. For another, it could be a portfolio of property, a nest egg, or to some, simply having enough money to no longer live paycheck to paycheck.
The key thing to understand is, regardless of your ambitions, it is important to focus on wealth growth. There are many ways to do it.
What is wealth building?
Wealth growth and saving your money is effectively the same thing. The only difference is that building your wealth seeks to generate its own income over a certain period. Fundamental wealth creation usually relies on financial planning and advice, so that is why we are here.
So how do you build your wealth?
The simplistic approach to wealth growth is:
- Make money
- Save money
- Invest money
- Repeat
Although you may ask, is it that simple? Fundamentally, that is all there is to it. However, our job is to look deeper into what’s involved to give you the best opportunity to build your wealth.
Firstly: Make money
Unless you have been born into a privileged life in which you have enough money to never have to work, you have to make money before you can grow it. This could be your salary or your side hustle. As long as you can make money, you’re on the path to build wealth.
Secondly: Save money
If you make enough money to be financially stable, you should save your money in some capacity. Not only is it wise to have an emergency fund or nest egg for a rainy day, but saving is also an excellent way to fulfil your short-term goals. Many believe that saving is the hardest step in wealth growth, but rest assured that starting is the toughest part.
Monthly budgets are a brilliant way to manage your savings. By setting yourself a personal budget, you can make sure you have small sums of money to tuck away monthly. Regular small savings can become one huge pot over a long enough period. For example, putting away £200 a month is £2,400 yearly – so after five years, you could have saved a whopping £12,000… at that’s before investing it!
Thirdly: Invest money
The initial mentality and habit phases to start your saving journey are difficult for some, and perhaps surprisingly not many people get to this step. The reason for this may be the complexity of investing, with an industry full of jargon and terminology making investments feel unapproachable or inaccessible for many. The second reason is cost, some believing that investing is too expensive for their position, or that you have to be super wealthy to invest. Which couldn’t be further from the truth.
Our wealth managers have made the investment journey as easy and digestible as possible for our clients.
Why is investing the final step?
The longer you invest, the bigger the rewards.
This is all thanks to the wonder called compounding. Compounding is what happens when you reinvest your profits so that that money can make profits of its own. The longer you do it, the more money you could make.
Do you have €10,000 to invest?
€10,000 is a big sum and definitely worth investing and allowing it to grow. We are here to guide you on how to invest your hard-earned money.
Think about your retirement
One option with your €10,000 is to build your retirement savings. Never think it’s too early to start saving in your pension pot. It could offer you a very comfortable retirement if you start investing now. The earlier you stat to invest the longer your money has to grow. If you have already established a retirement pot, adding such a substantial amount could significantly increase your retirement income.
Your next question may be ‘where should I put this money’? Your best option may be a personal pension. You can then choose how much you want to contribute. You depend on where you reside, you receive tax relief on every contribution you make.
Many believe pensions are complicated, but they don’t always have to be. With the help of our team, we do the hard work for you, ensuring you get the best returns on your pension savings.
Consider diversifying your portfolio
There is always a risk when it comes to investing, although there are ways to lower this risk. However, if you invest your €10,000, you should always ensure you spread the risk by diversifying your portfolio. Diversification means spreading your investments so that your exposure to any type of asset is limited. This practice is designed to reduce the volatility of your portfolio over time.
Having a range of investments can be time-consuming, especially if you have a busy schedule. This is where we’re to help. Our highly experienced team can choose the right funds to design your investment plan based on your risk attitude.
Try to think about the long-term
It’s a good idea to stick with your investments for the long run when it comes to building your wealth. The longer the investment, the more likely it will be to generate positive returns.
Take example people who invested in the FTSE 100 between 1984 and 2020. Those who held their investments for any 10-year period have had an 89% of making a gain – and this timeframe includes many market crashes, such as Black Monday in 1987 and the Global Financial Crisis in 2008-09.
In the long run, compounding can also dramatically increase your money. Deciding to invest for a few extra years could help see your pot grow larger. In other words, your initial €10,000 could really see many happy returns.
If you would like further no-obligation advice on wealth building and investing a sum of money, our team is here to help.
You choose how much you want to invest. We will then suggest an investment style which works best for you, your desired outcome, and meets your appetite for risk. Our team do the rest. Click here to schedule a no obligation initial consultation with one of our advisors.
Lawsons Equity – Financial Advisors Malta
Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change.
The value of investments and income from them may go down. You may not get back the original amount invested.
Lawsons Equity Limited is a company registered in Malta with company number C49564 and licensed by the Malta Financial Services Authority as Enrolled Insurance Brokers under the Insurance Intermediaries Act 2006, and to provide Investment Services under the Investment Services Act, 1994.
Lawsons Equity Ltd have passported their services across the EU. To see a full list of countries click here.
In the United Kingdom, Lawsons Equity Limited is deemed authorised and regulated by the Financial Conduct Authority. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority’s website.