Wealth Creation And The Risks To Watch Out For

Wealth creation is a goal shared by many

Wealth creation is a goal shared by many. We aim for stability and a good life, which will see us having our own homes, taking annual holidays, shopping when we feel like it, sending our children to private schools and retiring earlier than most people. While it may all seem like a tall order, given that there are financial risks involved in building ones wealth, it can be done. Becoming rich is possible if we mix together hard work, careful planning and discipline. Of course it also helps to know the common mistakes and risks to watch out for so you can avoid them as much as possible. Below are several examples:

1.Choosing the wrong financial institutions. Wealth creation requires a solid and stable financial institution where your money will not only be safe, but will also grow on a decent amount of interest the longer you keep it in there. Established banks dont give out really high interest rates, while the relative newcomers are only too keen to entice depositors with higher rates with very little guarantee for stability. There are financial risks when choosing a new face in the industry given their lack of a track record. Try to get the best deal for your money by making several inquiries at different establishments. Make a comparison chart to help you pick the best banks possible.

2.Accruing more debt to pay off old debt. Learn to pay off debt using whatever income you can generate. Dont aim for a fast payout by getting another loan to pay off the other debts. Unless your new debt will be interest-free, it wont make good wealth creation practice to acquire extra debt. Just concentrate on paying off what you currently owe. If you need some leeway with repayments, get into an arrangement with your creditors. They will understand your situation if you clearly outline your income restraints.

3.Not doing due diligence before making investments. One example of an investment for wealth creation would be in the form of mutual funds. Before you invest your hard-earned money into a mutual fund, you need to scrutinize first, along with your financial planner, what stocks, bonds and securities are being purchased by the collective pool. While mutual funds offer the advantage of liquidity, diversification and strong investment management, there are funds that charge high fees to investors. So, the key thing to remember in order to lessen your exposure to financial risks is to do your homework.

4.Not paying debts on time. You might think that a fifteen dollar repayment each month on that credit card is insignificant enough, but the truth is, the late fee attached to a missed payment could be higher than the repayment itself! Your wealth creation efforts can be easily destroyed by compounding late fees and interests tacked to the amount at the end of each billing cycle. Not only that, but delinquent account holders can find themselves penalized with a higher interest rate if the repayments are constantly missed for a number of months. Those are the financial risks you need to be aware of when dealing with credit cards or small loans.

5.Not doing enough research when applying for loans. Many people regret having taken out a loan quickly before shopping around for others. A one or two percent difference in the annual rate might seem small at first, but if you do the math, you will realize that the one or two percent could translate into hundreds and even thousands of dollars that you could have saved and put into your wealth creation account.

Dont be in a hurry to amass wealth so soon. The really wealthy and successful people did not acquire their riches overnight. It took years of careful planning, saving and LOTS of discipline on their part. Good luck and may your future see you enjoying the life youve always wanted.

by: Stephen Blyth

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