Y’all, I get it. Those after-work drinks aren’t happening, the idea of going to the gym makes me nervous, and I’ve definitely spent more time in my apartment than I ever imagined I would. I have so much extra time on my hands I’m having flashbacks to those pre-teen summers before I could drive.
So let’s talk about turning that extra time into wealth – wealth creation.
The formula to building wealth is simple. Save more than you spend after you’ve paid the essentials like rent, student loans, and credit cards. You can start doing that today.
Here are three of my favorite short-term strategies for long-term wealth creation:
Tip #1: Be intentional about your time
Where it makes sense, try to make some extra income. For me, I have a few opportunities every year to do some house and pet sitting, so I make sure to take advantage of those. It’s not hard work, and since I don’t have any pets, it’s really a win-win.
If you are very comfortable with copy editing or graphic design, you can pick up some freelance work. If you’re already the designated tour guide to your city in your friend group, you could create a virtual guide, sell those skills as an AirBnb experience, or use those skills as a Uber driver. The key here is to do something that’s comfortable and not too time consuming.
Use your strengths to your advantage. Don’t pick up a side hustle that ends up making you little money and taking up all your time. If that’s the case, you might be better off by focusing on getting a raise or promotion at your primary job. No matter what, be intentional about your goals and use your time wisely towards wealth creation.
Tip #2: Create income that doesn’t require your time
With the rise of retail investing apps, I’ve noticed that a lot of my friends have started investing in the stock market. But many jump in just for short term gains.
Remember, though, that building wealth requires long time scales. By thinking in years instead of days, one of my favorite wealth-building tools is called a Dividend Reinvestment Plan, or a DRIP. These plans take the quarterly cash dividend from a stock and reinvest it in the stock to buy more shares.
DRIPS are similar to compound interest in that over time, those reinvested dividends buy more stock, which then yields more cash dividends. It’s those positive feedback loops that are key to building wealth. The best thing, too, is that since you’re not trading stocks every day, you don’t need to spend a lot of time checking on their price – or worrying about the market. Over long time scales, the market generally goes up.
Importantly, though, be sure to talk with a financial advisor about how DRIPS might impact your decision before making any investments.
Tip #3: Spend some extra time shopping
I’m not a great shopper. Most of the time, I’m probably not the person you want to take with you to the store. That said, I think it’s usually worth spending a little extra time shopping around before making big purchases. In those few extra minutes, you might be able to find a substantial amount of savings by buying a model year older, getting a different color, or finding that coupon in your inbox or junk drawer.
I’ll give you an example. Last month, I needed to buy a new vacuum cleaner. My old one was a hand-me-down, and had lost so much suction that I wasn’t using it consistently. Plus, now that I’m spending more time in my apartment, I feel like I’m cleaning it almost every day.
What I did, though, was settle for an older model – but still new – Dyson vacuum cleaner. Based on the descriptions, the big difference was that the newer version had two or three more minutes of battery life, and the older version was only available in magenta color. But I saved at least $100 by buying the older version.
Just as important as getting the savings is what I did with it. Because I paid less, I used my $100 “savings” to put towards an extra student loan payment. So not only did I save money, but I also increased my net worth by reducing my debt.
These tips may seem surprisingly simple, but the key to wealth creation is to keep it simple. Over time, small savings here and there can add up to make a huge difference.
Do you do anything to reinvest into your future?
*Disclaimer – I’m not a financial advisor and this is not and should not be construed as financial advice. There is risk involved, and you should consult your financial advisor to make sure these tips make sense for your financial goals.
