Some of you know that as we’ve worked on our journey to get out of debt, we’ve been transitioning into a new goal: building wealth. When we first started our journey toward debt freedom in 2013, we didn’t know if we could even get to the point where we were paying the bills without scrambling each month.
With a $1,000 to $1500 and sometimes even bigger shortage every month, we would have been happy to break even. As the debt has gone down, the savings up and the shortage disappeared, we started to see that financial independence and stability were a real possibility.
So we started looking into this whole business of FIRE (financial independence/retire early) and how it works. I started reading blogs of people who were at the point where they had retired – or could if they wanted to.
The three main routes to wealth that most of these people talked about were:
- real estate
- business ownership
- stock market investing
The details of each investment avenue varied. Some gained wealth through real estate by flipping; others by owning rental properties.
Others gained wealth through a myriad of different businesses they owned. And still others gained wealth by investing in different stock market venues.
Some bought individual stocks. Others owned mutual funds or index funds. Others bought dividend-paying blue chip stocks. But they all reached their goals to be FI and to be in a position where they could retire early.
They’re Not Foolproof
That doesn’t mean the three main roads to wealth are foolproof. The stock market crashes, although it’s always proven to recover. But those investing in IPOs or new companies might find themselves losing a great deal of money if things don’t go as projected.
I’ve seen several people fail at real estate investing, whether because they bought at the height of the market before the big 2008 crash, or because they didn’t manage their rental property business wisely, or because they simply made a poor choice in the property or properties they purchased.
The same goes for business ownership. This post on the Motley Fool shows the rising failure rate of businesses as the years in business go on.
Depending on the type of business and the ability of the management team to grow it, business ventures are often risky ones.
And then there are the success stories.
It Can Be Done
Yesterday at a family gathering, I was talking with relatives who had owned several businesses through their lives (they’re in their late 70’s now) and finally settled on three that made sense for them (one was in manufacturing, the other two in janitorial services).
The businesses weren’t huge businesses by any stretch of the imagination but served the family well, providing a nice home, a cabin on the lake and plenty of surplus spending money.
A couple of years ago they sold the three business. When they talked about selling one of them, the guy mentioned that two people came in to talk with him about buying it, tipped off by their local banker.
My relative threw out his dream number to the guys. His mouth about about hit the floor when they answered, “Okay.”
The deal was done, they sold the other two businesses for a nice profit, and now spend their time traveling the world in luxury, driving their brand new SUV to wherever they want to go.
The couple is the first to admit they worked their living tails off to grow these businesses. And they worked longer than they had to because they loved the work.
The payoff was great. It worked. Their businesses provided a comfortable semi-lavish lifestyle during their working years and endless comfort in retirement.
What Will Your Road to Wealth Be?
Now it’s time for you to choose. What will your road to wealth be? Will you work at your job and invest all extra income into some form of stocks, funds or bonds? Or will you save to invest in real estate?
Or will you turn in your office job for ownership in a business?
It’s important to choose a path to wealth that you’ll love. If the stock market sends your heart into palpitations, it might not be the best wealth building tool for you – at least not in large quantities.
Likewise if you hate the thought of owning and maintaining rental properties, you may want to avoid investing in real estate as part of your wealth growing path – unless you’re willing to pay someone to manage the properties for you or invest in real estate via crowdfunding.
The point is that growing wealth through these three avenues can work, provided you educate yourself and make the right choices for you.
How are you building your financially independent money stockpile?