When you are just starting out to build wealth, the process is usually quite boring. It takes a fair bit of time to build up a sizable enough nest egg for the magic of compound interest to kick in.
But as time goes on, your money does more and more of the heavy lifting – so that you don’t have to work as hard.
The culmination, of course, is when your money is working hard enough so that you can quit your job and do whatever your heart desires. Once that happens, you’ve reached the holy grail of financial independence, and it’s awesome.
But what to do if you happen to find yourself at the very beginning of this journey?
Well, first of all, don’t despair. Becoming wealthy is not as hard as people make it out to be. It will take time, but you will get there.
Even more importantly, the beauty of being a beginner is that you can grow your net worth in ways that aren’t available to those further along the path.
Today, let’s take a look at some easy tricks that any beginner can use – and that are almost too good to be true.
Getting A Guaranteed 25% Return On Your Money
Forget the stock market. Forget real estate investing. Chances are, there’s something much, much better you can do with your money.
In the US, 37% of households carry credit card debt. No, not the one where you pay your card off every month and get the points. The one where there’s a balance on it for months, if not years.
I couldn’t find the stats for the UK, but I’d assume we are not far behind our American friends.
Pretty awesome… for the banks
If you happen to be in this category, this is your #1 opportunity to build wealth. At the moment, every £1,000 you owe on your credit card generates £250 of interest. The sad thing is that you are not the one collecting this interest – your bank is.
In the meantime, this debt continues to weigh you down like a pair of cement shoes while you struggle to come up for air. Getting rid of it is the absolute ground zero for building wealth.
If you can’t pay it off right away – refinance at a more reasonable rate (say 5%) – and you are still getting a 20% return on your money.
You will never get a better deal on your money again, guaranteed.
Doubling Or Tripling Your Money On The Spot
No, you don’t have to go to Vegas for this one. As a matter of fact, this requires barely any effort from you – other than making sure you are enrolled in your workplace pension scheme.
If you’ve spent any amount of time reading FI blogs, you will know that Americans love their 401(k) plans – and rightly so. Well, I’ve got news for you – the UK workplace pension scheme is FAR more generous than 401(k).
MUCH better way to build wealth than a slot machine
Yes, it’s boring. Yes, it’s going to be years/decades before you get to cash it in. But imagine being 55 and saying “Ah, I remember the time when I could double my money on the spot… boy, I sure am glad I said no to that one!”
Between employer matching, tax breaks, and tax-free growth, it’s one of the best wealth-building tools you’ll ever get access to. Use it.
Investing In The Stock Market With No Downside
Yes, this one is also possible – as long as you happen to live in the UK.
If you work for a publicly traded firm, chances are they offer a Save As You Earn scheme. It really is a thing of beauty. You sock away anywhere between £5 and £500 a month. Three years later, you get to do one of two things:
- Use your savings to buy shares in your employer at a 20% discount to the price set three years ago (so you get to keep all the upside too!)
- Take your savings as cash (if the share price happens to have declined)
In other words, there is no downside. Now, this is as close as I’ve come to a free lunch in the time I’ve been around. Chances are, you won’t get a better deal either. Get in on it.
Getting FREE Money From The Government
No, the government isn’t exactly knocking it out of the park when it comes to helping you on your journey to financial independence.
Occasionally, however, it does come up with some bright ideas. And the Lifetime ISA is one of the best things I’ve seen come out of Westminster in a long time.
In case you haven’t heard of it, it goes like this: if you are between the ages of 18 and 40, you open an account and contribute up to £4k/year. The government then steps in and gives your money a 25% boost.
If you get in early enough, this means up to £33k of free money from the government.
Make sure you read the fine print but this is the essence – and it’s pretty damn good.
And if you have heard of it but haven’t yet signed up, then WHAT ARE YOU STILL DOING HERE???
So there you have it. Reaching financial independence is fun and rewarding. One day, you will get there.
And if you want that day to come sooner rather than later, then use the tricks above to get off to a quick and enjoyable start.
About Banker On Fire
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Banker On FIRE is an M&A (mergers and acquisitions) investment banker. I am passionate about capital markets, behavioural economics, financial independence, and living the best life possible.
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