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If you are not rich, you may be wondering how you can become rich at different times in your life. Building long term wealth usually means making smart decisions with your finances, like investing consistently and prioritizing paying off any debt.
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What it doesn’t include is spending money on things that have no lasting value. How do you know what purchases are preventing you from building wealth? This is what a financial planning expert don’t recommend spending your money if you want to be rich.
This includes designer clothes, expensive watches, vintage cars, and any other high-priced status symbol items.
“Buying luxury items you can’t afford can take a toll on your finances,” said Ryan Cullen, co-founder and CEO of Cullen Cioffi Capital Management. Cullen recommends focusing on building your wealth by investing in assets that increase in value over time, such as stocks or real estate.
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Impulse purchases can be lottery tickets or anything you might buy when you’re feeling a little emotional, like shopping after a hard day’s work. These accumulate over time and can drain your finances. The best approach, Cullen said, is to focus on making a solid financial plan and sticking to it.
“Renting may seem like a more affordable option than owning a home, but it can be more expensive in the long run,” Cullen said. “Focus on building your wealth by investing in real estate, whether that’s buying a home or investing in rental properties.”
High interest debt
Those who want to build wealth but have credit card debt, payday loans, or personal loans may find that paying high interest rates quickly eats away at those efforts.
To avoid high-interest debt, Cullen recommends living within your means, creating a budget, and paying off all outstanding debt in full as soon as possible.
Overpriced financial products
“Financial products like annuities, whole life insurance, or high-fee mutual funds can promise high returns, but they often come with significant fees that can erode your returns,” Cullen said.
If you don’t want to invest in these products, but still want to grow your wealth, Cullen recommends considering low-cost index funds or exchange-traded funds (ETFs). These are inexpensive and provide diversified exposure to the stock market.
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