Thinking out of the box is the key to achieving financial freedom and accumulating wealth. Most people believe that earning a college degree and working a well-paid job will help them to earn a good living. Here are some secrets that well-to-do people rarely share that will help you to attract wealth energy.
Budgeting to Build Your Net Worth
Budgeting is the first step to financial stability and the first technique to master. Budgeting means tracking your spending over time to see whether any money is left after covering all expenses. There are bills and expenses that most people pay on a monthly basis – debt payments, groceries, gas, water, and other utilities, transportation, and housing. In addition to regular expenses, there are also less predictable or unexpected expenses such as insurance coverage, gifts, vacations, and home and car repairs. They may reach 10 to 30 percent of your monthly expenses. Budgeting also involves adding up sources of income such as bonuses, salary, and wages. What is left after deducting your total expenses from your income is money that you can use to create an emergency fund or invest to build wealth. If there is no money left to invest and increase your assets, you will never be able to build a healthy net worth.
Increasing Your Net Worth
Budgeting is only the first step to achieving financial freedom. The next step is to focus on your net worth which is the difference between the total assets that you have and your liabilities. Examples of assets to include are tangible assets such as land, inventory, and personal possessions, including collectibles, jewelry, electronics, and vehicles. There are also non-physical or intangible assets such as franchises, software, patents, and copyrights. Personal assets are intangible and tangible and may include things like savings and retirement accounts, insurance, and works of art. Liabilities, on the other hand, are obligations or debt that you owe. Liabilities include things like vehicle and student loans, credit card balances, and mortgage payments. One way to increase your net worth is to eliminate debt and another is to buy assets that generate income. Such assets are, for example, bonds, certificates of deposit, money market savings accounts, and single family rentals.
Choosing the Right Investment Instruments to Build Net Worth
The key to building a healthy net worth is choosing the right investment instruments based on factors such as your investment objectives, age, and risk tolerance. There are advantages to being young such as fewer responsibilities, higher disposable income, and higher risk tolerance. If you are in your 40s, there are advantages as well, including more experience and better ability to identify and deal with problem situations. Your investment objective is also an important consideration, whether it is saving for retirement or making high profits. If your goal is to have some type of passive income or to keep your money safe, then investing in low-risk instruments sounds like a good idea. Interest paying bonds and fixed deposits are two options to look into. Bonds can be purchased from different establishments and institutions such as local and state governments, small and large companies, and foreign companies. Depending on the entity offering bonds, there are different types, including foreign, municipal, agency, treasury, junk, investment grade corporate, and corporate bonds.
Fixed deposits are offered by banks and feature higher rates than standard instruments such as savings accounts. Certificates of deposit also pay higher rates and come in different types such as liquid, IRA, jumbo, and traditional. If you have a higher risk tolerance, you can choose from a pool of high-risk options such as contracts for difference, equity investments, spread betting, and venture capital trusts. Investing in biotechnology stocks, for example, is risky, and the reason is that up to 90 percent of experimental drugs and therapies fail. Land banking is also a risky investment because the plots on offer are usually too small, brownfield, or green belt, for which planning permission has not been obtained. Other high-risk investment options include peer-to-peer lending, mortgage real estate investment trusts, and closed-end funds.
Developing Skills and Healthy Financial Habits
Persons who make sound investment decisions also have good money skills and financial literacy.It is important to develop healthy financial habits to stay away from debt and increase your net worth. Essential skills to focus on and master include tax, debt and credit, spending, and saving skills. Analytical skills also help with problem solving, prioritizing, planning, financial planning, and decision making. People with strong analytical skills are also good at risk management and risk analysis, troubleshooting, and data interpretation. Having good financial literacy is also the key to making sound decisions and achieving short- and long-term financial goals. People with good financial literacy have understanding of basic concepts such as interest rates, repayment terms, inflation, bear and bull market, and liquidity.
Diversifying Your Income
Relying on a single source of income can be risky because you are dependent on it, whether it is your regular job or rental income. The main types of income to look into are capital gains, royalty, rental, dividend, interest, profit, and earned income. Profit income refers to profits made by selling goods or offering services. Interest income is money that you get by investing in different interest-bearing products which basically means that you are lending money to an individual or institution.
Dividend income is an example of a passive source of income that you get by investing in company shares. Common types of dividends include liquidating, scrip, property, stock, and cash dividends. Building a balanced portfolio involves investing in a mixture of instruments for optimal returns. A conservative portfolio includes up to 75 percent of fixed-income securities, between 5 and 15 percent of cash and cash equivalents, and 15 to 20 percent of equity investments. A moderate-risk portfolio, on the other hand, includes up to 40 percent of fixed-income instruments, between 5 and 10 percent of cash and cash equivalents, and up to 55 percent of equities. After deciding on the right mix of assets, the next step is to choose from different sub classes of assets such as corporate and government debt or foreign and domestic stocks. The last step is to choose from different investment instruments such as exchange-traded funds, mutual funds, bonds, and stocks.
There are simple things to do to achieve financial security and freedom, including budgeting to find out whether any money is left to try to increase your net worth. Assessing your present net worth, on the other hand, will help you to see how close you are to reaching your financial goals. Choosing the right investment instruments will also help you to build your net worth and mastering basic money skills will help to this end. Financially literate people know how to track their spending, manage debt, create and stick to a budget, and make sound decisions when it comes to choosing the right insurance product or investment tool. Financially literate people are also in a better position to avoid costly mistakes such as being defrauded or falling victim to predatory lenders. Mastering essential money skills is the key to achieving financial health and making money work for you in the long run.
Scotiabank features a travel card that offers rewards points on entertainment, dining, grocery shopping, gas, and other eligible purchases. Their Scotia Rewards Travel Service enables customers to book travel and enjoy a comprehensive insurance package. Other travel perks and incentives include special offers, Priority Pass membership and access to airport lounges, and concierge services. The card offers additional benefits such as access to fashion, music, film, and dining events. Supplementary cards are also available.
Home Trust offers a Visa card with travel benefits such as no foreign exchange conversion fees, auto rental collision insurance, and roadside assistance. Roadside assistance is offered free of charge and entitles customers to 4 service calls annually. Cardholders also earn 1 percent cash back on all items charged to the card, and there is no limit to the amount that can be earned.
This rewards credit card by MBNA is a good deal in that it allows customers to earn points on a daily basis. Every dollar spent on eligible purchases earns 2 points, including dining, grocery items, and gas. A welcome bonus of 2,500 points is offered with the first purchase to customers who opt for e-statements. Cardholders are free to redeem points for gift cards, travel, merchandise, charity donations, etc. They also enjoy everyday and security services such as lost luggage assistance, emergency services, and ticket replacement.
This card by American Express also features multiple benefits such as free additional cards, access to special offers and reserved tickets, and travel coverage. Customers are offered the chance to make restaurant reservations and buy presale tickets for special events, including theatre performances and concerts. An added advantage is the fact that there are no travel and seat restrictions. The first $500 purchase earns 10,000 rewards points, and referring a friend earns additional $5,000 points. Each dollar in purchases is equal to 1.25 points.
Offered by the Bank of Nova Scotia, this cashback card features a special offer so that customers earn 10 percent back on all purchases made during the first three months. Each dollar spent at grocery and drug stores earns 4 percent and at gas stations – 2 percent. Other benefits worth mentioning include concierge services, access to dining experiences and premier events, wine purchase discounts, complimentary wine tastings, and more.
Also a great credit card to earn money on purchases, Meridian Visa Infinite features 10 percent cash back on items charged during the first 3 months. Utility bills and pharmacy purchases earn 2 percent, grocery and gas earn 4 percent, and all other purchases – 1 percent. Rewards can be redeemed in the form of gift cards, account credit, events tickets, and merchandise. The card also comes with a comprehensive insurance package, including travel assistance, baggage insurance, and emergency health care coverage.
Also a good choice to earn rewards points, this card by American Express comes with a low interest rate and a welcome bonus of 30,000 points for purchases worth $500 made on a monthly basis. Each dollar spent in cafes, bars, and restaurants earns 5 rewards points. Supplementary cards are offered at no additional cost. Customers enjoy multiple benefits, including shopping deals, weekend gateway experiences, advance movie screenings, reserved tickets, and presale tickets for major events.
The Bank of Montreal also offers a rewards card with shopping and travel benefits, an annual fee waiver during the first year, and a welcome bonus of 35,000 points. One dollar spent on everyday purchases earns 2 points, and $1 on entertainment, restaurant, and travel purchases earns 3 points. Customers also benefit from access to vacation packages, cruises, car rentals, and other travel benefits.
Customers who need a card with comprehensive travel coverage may check this card by Scotiabank, which also features an attractive rewards scheme. Travel coverage includes travel accident, travel emergency medical, flight delay, lost and delayed baggage, and other types of insurance. Cardholders also earn 1 point per dollar on everyday purchases and 4 points per dollar on entertainment, gas, dining, and grocery purchases. The list of added benefits includes concierge services, access to special offers, experiential tours, culinary experiences, and Hertz #1 Club Gold membership.
This Visa card also comes with a comprehensive insurance package, including travel, common carrier accident, emergency health care, trip interruption or cancellation, and baggage insurance. The card also offers 2 percent cash back on purchases and features wine and food experiences, concierge services, and hotel and travel benefits. Customers enjoy exclusive travel benefits such as airport parking discounts, security fast track lanes, and Priority Pass membership. Hotel benefits include beverage and food credit, complimentary daily breakfast, and automatic room upgrades based on availability.
This credit card by the Bank of Montreal is especially designed for students and features discounts on food, dining, clothing, beauty, and other items. Cardholders are offered 5 percent cash back on purchases during the first three months and 1 percent after the promotional period. Students also benefit from access to sports events, premiers, and concerts, exclusive deals, and add-ons such as BMO Roadside Assistance and Credit Alert. A signature or reference letter from parents is not required.
Scotiabank also offers a student card that is suitable for young people with no credit history. The card features a rewards program that offers customers the chance to earn 5 points per dollar on Cineplex purchases and 1 point on everyday purchases. Scotiabank offers multiple benefits such as discounts on car rentals, supplementary cards, and optional protection in case of critical illness, lockout or strike, job loss, disability, etc.
This card is a good option for borrowers with tarnished credit and requires a security deposit as a guarantee of repayment. The minimum deposit is $500 and the maximum deposit – $10,000. Customers can use the card to book vacations and make online or in-store purchases. Cash can be accessed at ATMs with the Plus and Visa logo. The approval rate is quite high (over 95 percent), which makes this secured card a good choice for customers who seek to reestablish credit.
This card is a good choice for newcomers to Canada and persons with no credit history. Scotiabank offers the option to transfer balances, and customers benefit from a low 3.99 percent introductory rate during the first 6 months. Additional benefits for cardholders include car rental discounts and Visa Checkout.
This MasterCard by MNBA comes with a zero promotional rate on balance transfers during the first 10 months, allowing customers to transfer high-interest balances. There are many benefits for cardholders, among which legal assistance, pre-trip information, and lost ticket and lost card replacement. Up to nine authorized users can be added free of charge.
Another option by President’s Choice Financial, this card comes with a very low balance transfer rate of 0.97 percent during the first 6 months. Customers also earn 3 cents per litre at Mobil and Esso gas stations, 25 points per dollar at Shoppers Drug Mart, 20 points per dollar at PC Travel, and 10 points on all other purchases. Added benefits for cardholders are emergency cash advances, free extended warranty, and the option to request up to 4 additional cards at no added cost.
This card by Canadian Tire allows holders to earn 3 percent on grocery purchases, 5 – 7 cent per litre at Husky and Gas+ stations, and 4 percent in CT money. Customers also enjoy perks such as concierge services, personalized offers, roadside assistance, and access to exclusive events.
This card is offered to Costco members and features 1 percent cash back on regular purchases, 2 percent on gas, and 3 percent on dining. The array of everyday and travel benefits includes travel assistance, baggage delay and common carrier travel accident insurance, and price protection.
Canadian Tire also advertises instant decision for customers who fill in the application for approval. The Triangle MasterCard® allows customers to earn rewards that can be redeemed at Atmosphere, Mark’s/L’Équipeur, Sport Chek, and Canadian Tire. There is a host of benefits for holders, including access to exclusive events and offers, no-receipt returns, and 5 – 7 ¢ per litre in cash back in CT Money when making debit or cash purchases. Weekly flyer bonuses are also available. Like other instant approval credit cards, customers who are retired or employed, are of legal age, and are Canadian citizens are eligible to apply. Applicants are asked to provide details such as address and name of current employer, annual income, and previous address. (*Note that customers have reported that approval process may take 2 weeks.)
Low Rate Guaranteed MasterCard® requires a security deposit and goes with added incentives such as travel assistance, baggage delay insurance, and common carrier travel accident insurance. Other perks include emergency cash advances and card replacement and extended warranty. All applicants qualify provided that they do not have an account at the bank which was not in good standing and are of legal age.
The Guaranteed MasterCard® is another option for customers who are looking for a guaranteed credit card. This product comes with travel and everyday benefits such as car rental collision waiver, extended warranty, and others. Customers benefit from legal referrals, lost luggage assistance, lost ticket and documents replacements, medical referrals, and others.
The Preferred Rate MasterCard® by BMO® is one option to look into, which comes with a low intro rate of 3.99 percent. This rate applies to balance transfers during a 9-month promotional period. There are add-ons such as balance protection and roadside assistance. BMO also advertises security features such as MasterCard SecureCode, zero liability, and chip technology. Customers are eligible to apply provided that they did not file for bankruptcy during the past seven years and are of the age of majority in their territory or province of residence. They are asked to bring photo identification such as their territorial or provincial health insurance card, certificate of Canadian citizenship, Permanent Resident Card, driver’s license, Immigration Canada Documents, etc. When applying for a card, customers are asked about their housing status, address, monthly payment, years of employment and employment information, income details, and more.
The Vancity enviro Secured Visa is also a good choice for customers with fair and tarnished scores, those with past financial problems, and recent immigrants. Those who deposit $500 or more in their TFSA, Jumpstart High Interest Savings Account or Vancity Term Deposit are offered an enviro Visa. The amount deposited determines the limit. The card goes with multiple benefits such as Visa payWave and Checkout, stolen and lost card protection, recurring payments, lost and delayed baggage insurance, travel accident insurance, and more. Optional coverage includes trip interruption, trip cancellation, and travel medical insurance as well as critical illness, life, and accidental dismemberment insurance. An added benefit is the option to set up automatic payments to avoid late and missed payments. Customers also have access to their online account information, including statement data, transactions, and current balance. Customers can apply by visiting a local branch.
Toronto Dominion features the TD Cash Secured Credit Card which requires a deposit made into a TD Simple Savings Account. The deposit serves as collateral and can be as low as $500. On the good side, this card allows holders to earn money back on regular purchases, purchases at grocery stores, and dining. Holders earn 1 percent back on regular purchases, 2 percent on groceries, and 3 percent on fine and casual dining. Additional benefits include instant card replacement, chip technology protection, and digital wallet that allows customers to add their card to their phone. *Please note that this card is no longer available.
The Canadian Imperial Bank of Commerce also offers secured cards to newcomers, Canadians trying to rebuild or build credit, and international students. Applicants are asked to make a security deposit which is held in an interest-bearing investment instrument. Newcomers to Canada can choose a card that is tailored to their requirements provided that they have another borrowing or banking product in good standing, including a mortgage, line of credit, loan, or savings or chequing account. A security deposit is not required, and customers with no credit history qualify provided that they meet the criteria.
