Income inequality has become an increasingly important topic in recent years, as the divide between the world’s rich and poor people continues to grow. The gap between the net worth of billionaires and middle-class families is vast. In fact, there are more billionaires than ever before, and they have more money than ever before.
Here are some personal finance tips from billionaires that will help you make the most of your money, even if you’re just starting out in life and have barely any savings at all.
Understand the Value of Compound Interest
Studies have shown that it can take anywhere from 15 to 25 years for compound interest to make a real impact on your savings. Make sure you’re not just contributing to your 401(k) because it’s automatic, you may be missing out on some extra cash if you do so. If you have access to a Roth IRA, for example, consider putting part of your contributions there instead.
Avoid Unnecessary Debts
Don’t borrow money if you don’t need to. Instead, invest your money and save for things that you want. Get rid of credit card debt fast. The first step to getting out of credit card debt is to eliminate those high-interest credit cards that continue to charge you interest and get into a cycle of debt. It’s important to take a close look at your finances and create a plan that can help you end your cycle of debt for good. Also, check whether you’re eligible for credit card debt forgiveness. This will allow you to make reduced payments on your loans for a certain period of time.
Invest in Real Estate
Real estate, particularly rental property, is typically a great investment. When you own real estate, your biggest expense, besides mortgage payments, is usually taxes. In most cases, your property will increase in value over time, and if it doesn’t, you can always sell it and use that cash to buy another piece of real estate. There are many ways to invest in real estate; for example, you can purchase a single-family home and rent it out or buy multiple properties and rent them out as well.
You can also choose to become a landlord by purchasing an apartment building and leasing out individual units. Whichever way you decide to go, remember that buying real estate is not without risk, so do your research before jumping into any deal. Before making any decisions about investing in real estate, make sure you consult with an accountant or tax professional who specializes in real estate investments.
In terms of finances, one of your best bets is to use technology to better understand your financial position and manage debt. The best personal finance tools will help you create budgets and track spending. At a glance, you’ll be able to see where money is going each month so that you can adjust accordingly. Some tools will even allow you to create financial goals and set reminders for when bills are due or cash is available in your account. It’s also worth considering an online bank if you want to keep your savings somewhere other than at a traditional brick-and-mortar institution.
No Amount is Too Small to Save
No matter how large or small your income is, one way to ensure it will last you throughout retirement is to start saving from day one. To help you develop a realistic savings goal, use an online retirement calculator and adjust your figures based on what you’d like to spend in retirement. If possible, begin saving as early as possible, when starting a business or even if working for someone else. The sooner you get started saving, the easier it will be to build wealth over time.
Personal finance isn’t just for millionaires. Everyone needs financial advice on how to be smart with their money and spend it in a way that will help them reach financial freedom and stability. Start off on a good foot by checking out these personal finance tips from billionaires, and implementing them right away.