Essentials for building wealth

There are only a few essentials required to build wealth, once you master them you will have the ability to build your personal wealth and have a financially stress-free life.

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  DEBT Management

Most lenders use your debt-to-income ratio to determine if you are eligible for a loan. If you have too much debt relative to your income, it is a good chance you won’t get approved for a loan. For most lenders, the cutoff is around 41%. If you spend more than 41% of your income on debt payments each month, you will be considered a high-risk candidate for a loan. Lenders will be concerned that you won’t be able to make all your debt payments and may default on their loan. Therefore, you may be rejected for a loan.

Where do you fit in?

36% or less – You are financially stable and should have no problems getting approved for new financing assuming you have good credit.

36% – 41% – Is an acceptable amount of debt relative to your income, but you may want to eliminate some debt or show additional income before you apply for your next loan.

41% – 45% – You may have too much debt and may not get approved for new loans with some lenders; you will need to eliminate some debt(s) or increase your income to increase your chances of getting financed.

46% – or more – You may have a tough time paying your debts, which may lead to financial hardship.

CREDIT

Good credit is essential when trying to build wealth. Good credit can provide you the benefit of borrowing money for investing or starting a business. Since most lenders use score driven systems they will make their decisions solely base on your credit score,  and if you have collateral and the ability to pay, they may turn you down, because your credit score does not qualify you for a loan. Some people don’t use credit, and not having credit is the same as having bad credit because lenders want to see how you pay others before they put their money on the line.

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 FINANCIAL LITERACY

Financial literacy is at the top of the list when it comes to building wealth because the more you know and understand about personal finance and business the greater your chances are for building wealth. When you diverse knowledge and understanding in real estate, personal finance, stock accumulation and other areas of finance, you can build your wealth without worry. When you are financially literate you are able to make “informed” financial decisions that will save and make you money.

       

 REAL ESTATE INVESTMENTS

Fact, real estate ownership is the equalizer when it come to building wealth. Owning real estate is one of the easiest ways for the average person to build wealth, especially if it is rental property.

Buying a personal residence

When you are buying a personal residence you are putting money back into your pocket via depreciation, deductible interest and appreciation, in addition to the ability to refinance the property and get cash.

Investing in real estate Real estate

Investment is a financial strategy that uses the management, ownership, purchase, rental, and/or sale of property for profit. There are several ways to invest in real estate, but they all rely on similar economic factors to earn profit.