Wealth creation tips: Building wealth with real estate

Wealth accumulation calculator

At this point, we would like to show you how a monthly savings installment of 25 euros can have an impact if it earns interest at 2.5 %. You will see: Building up assets is not that difficult:

With an interest rate of 4%, the balance would already amount to €3,679.87 after ten years, with an interest rate of 6% even €4,082.75. It is possible to get rich with 25 euros in the (very) long term, but this depends heavily on the interest rate applied, which in turn depends on the risk you want to take. However, this example shows you how easy it is to calculate your wealth accumulation in order to save money with a suitable strategy.

What steps come before the actual wealth accumulation

Many people want to increase their own wealth. But what is the best way to start? What do you need to bear in mind? Before you can invest money and build wealth, you should first put money aside.

Easier said than done? Not necessarily. Find out in the following section how you can approach the topic of “saving” and what you should keep in mind. You should pay attention to these aspects when preparing to build up your wealth:

1. personal assessment of your financial situation

Before you start thinking about how you can increase your wealth, you should first analyze what assets you already own (car, household items, watches and jewelry, etc.) Next, you should consider monetary assets such as cash, bank deposits, securities, etc. Of course, you should also add your regular sources of income and consider your fixed expenses (rent, insurance, leasing or contract installments, etc.) in the same step.

You now have a valuable overview of your financial situation. Important: First of all, you should ensure that you have basic needs covered and a reserve for unexpected financial bottlenecks before building up further assets. Of course, there is no general answer to the question of how much a nest egg should be. However, the guideline is to set aside 3-6 months’ salary. Continue with step number 2.

2. How can you save money? – Tips for everyday life

The typical saving process usually looks like this: Salary is received, all fixed costs are paid and if there is any money left over at the end of the month, this can be saved. This is the wrong approach because you should put some money aside right at the beginning of the month. You can do this either with a fixed savings plan (e.g. ETF) or by transferring a certain amount to a separate account. However, there are also many ways in which you can best save on a day-to-day basis and build up assets in the next step. Here are some examples:

• Cancel old contracts that are no longer needed
• Car sharing
• Avoid spontaneous purchases, i.e. don’t go shopping hungry or emotional
• Draw up a budget
• Cooking for yourself instead of ordering in or eating out
• Sell items that you no longer use
• Compare prices and switch providers if necessary (e.g. cell phone, electricity, etc.)
• Avoid consumer credit: only spend money that you really have

3. the right wealth accumulation strategy: define your target and investment horizon in advance

Investing money should be well thought out! The question of the right investment strategy is just as individual as each investor themselves. Everything offers opportunities and risks. Many factors play a role in your own decision, because you should of course be satisfied with the path you have chosen in the long term. You may already have specific goals when you think about your life in the future and what you want to achieve in terms of your private assets.

Keep these in mind, as inner motivation is a driving force that should not be underestimated when it comes to achieving personal success. Perhaps the issue of sustainability also plays a role for you when building up assets, in addition to factors such as the security and profitability of an investment? The more specific your investment goal is defined, the more focused you can invest your money and increase your wealth. You can find out which specific investment options are available to you here: investing 5,000 to 1 million euros correctly.

4. the right mindset when building wealth – better to start today than tomorrow

There is no such thing as too young when it comes to building wealth. Even with little money, there are ways to deal with the topic of long-term wealth accumulation in particular and to start doing so. Investing in your own financial education is also of great importance for future success. With the right strategy and future-oriented thinking, important building blocks have been laid for successful wealth accumulation.

Another advantage of starting to build wealth at a young age is the fact that you should be patient with many investments. Especially with riskier forms of investment such as shares, you often have to accept fluctuations in value in order to achieve attractive returns at the right time. And even with small investments, you are taking a step in the right direction. Because, as we all know, every little helps!

How to build up assets

All the groundwork has been laid, all the preparations have been made. However, in addition to the right investment strategy and the right mindset, there are other points that you should take to heart when it comes to building up your wealth.

Repaying off debt before building wealth

Take care of paying off existing debts first and start the wealth accumulation adventure as a blank slate. This is the only way you can really benefit from the return on your investment.

Inflation – the enemy of us all

You can’t say that across the board! Take advantage of the current market environment and seize the opportunities that arise. The process of building up assets is undoubtedly a lengthy one. Of course you don’t want your investments to lose value. In inflationary times, you should focus on investments with stable value. We are talking about so-called tangible assets, such as an investment property. Read our article “Investing in tangible assets” to find out exactly what tangible assets are and why they can be an important component of an investment strategy in inflationary times.

Have you thought about diversification yet?

This primarily involves two important aspects of asset accumulation: risk diversification and protection against losses. Diversification aims to create a balance between the returns and risk of different investments in order to achieve a balance when looking at the big picture. Different investment areas also react differently to world events and disruptive events. While an event in one market can cause an unpredictable fall in prices, in another it can have the opposite effect and even bring about positive aspects.

Find the balance between rebalancing and confidence

Of course, there will be times during the course of your wealth accumulation when you will question your strategy, or at least parts of it. One important aspect of your strategy will probably be its long-term nature and, as the saying goes, good things take time. Decisions that are made impulsively and out of emotion are rarely well thought out and successful. So when fluctuations occur, it is important to take a deep breath and keep a cool head. Keep in mind the aspects that led you to develop this strategy in the first place.

On the other hand, there is rebalancing. It goes without saying that you should regularly review the various components of your portfolio. The most important thing here is to consider your personal circumstances. Perhaps your risk appetite has changed and you are tending to replace some of your safety-oriented investments with riskier ones? Are there new products on the market?

Or have you recently devoted yourself to your financial education and created a new perspective on the topic of wealth accumulation? Of course, a healthy and thoughtful consideration of economic aspects such as interest rate trends and much more cannot be dismissed. In the end, one thing is important above all: stay true to yourself and your wishes and aspirations!

Build wealth with real estate

Building wealth through real estate is a much more lucrative option. However, this does not mean that you buy a property to live in yourself. If you want to build up passive wealth, this only works if you rent out the property after purchasing it. In this way, you collect monthly rental income and can build up a considerable fortune.

The purchase price of the property is financed by a bank, so you only have a small equity investment and can use the leverage. Your tenant therefore helps you to pay off your property with their rent payments. After a few years, you will own a paid-off property that will continue to grow your assets every month.

With a rented property, you can therefore build up passive wealth with little risk, as real estate is still one of the safest forms of investment and has almost always proven itself in the long term. High returns and security are usually mutually exclusive. Real estate, on the other hand, combines these two components and is therefore one of the best investments at the moment, with minimal risk.

It is particularly profitable if you develop an asset accumulation strategy with several properties. The earlier you start, the better. As the purchase price is almost entirely financed, it is possible to build up assets at a young age without having to invest a lot of equity.

Conclusion

The topic of wealth accumulation is an intensive and important one, where the following applies: “Knowledge is power and applied knowledge is strength.” Seize your individual opportunity to build wealth. Whether you are just starting out on your journey or are already in the middle of it, we at Meine-Renditeimmobilie will be happy to assist you. Arrange a free, no-obligation consultation today and take the next step towards achieving your goals.