If you’re taking the time to read this blog post, it’s probably safe to say you’re interested in building wealth. And, why wouldn’t you be? Earning money won’t solve every problem in your life, but having a certain level of wealth does make it easier to take care of your family, breath easier, and be generous with causes you care about.
While there are many ways to build wealth, one of the most common wealth-building platforms you hear about is the stock market. But, considering we are at near-record highs, investing in the stock market may feel risky. A lot of experts are predicting another major correction in the near future, which could mean that now is the worst time possible to invest in stocks.
How to Build Wealth Without the Stock Market
But the news gets worse. It’s been reported that half of stocks that hit the market have only a seven-year lifespan — as in, 50% of new stocks created today won’t be around in seven years.
Also note that only the top 4% of companies — which works out to around 1,000 stocks per year — account for almost all the wealth creation in the market. So, if you opt to pick stocks individually, you have a 4 in 100 shot in making the right choice each time.
I have been a financial advisor for over sixteen years, and I have seen firsthand the power of investing in mutual funds, ETFs, and stocks. Over time, investing in the stock market is a smart way to build wealth. But, considering we may be in the midst of a market bubble, you may not want to tie all your funds up in the stock market right now.
Fortunately, there are ways to build wealth that don’t have anything to do with the stock market. These strategies can be used in place of or congruent with other investments such as a 401(k), traditional or Roth IRA, or taxable investment accounts.
#1: Real Estate Investing
One of the most popular ways to build wealth outside the stock market is with real estate. Before I dive in though, keep in mind that I am far from a real estate expert. In fact, I have an entire YouTube video on my failed real estate investment to prove it!
The cool thing about real estate is that there are plenty of ways to invest depending on your skillset. You can invest in commercial real estate, you can invest in rental properties, you could flip houses, or you could invest into properties that would be hot on Airbnb.
If you feel overwhelmed by those options, it’s totally normal! After all, real estate investing is a tricky business where you can lose money just as easily as you can earn it.
It can help if you can try to learn from the experts in your area. Ask local real estate agents about the top real estate players where you live, then see if you can ask them out to lunch. Also check out awesome videos from Graham Stephan and Brandon Turner from BiggerPockets on YouTube. These guys offer some awesome videos that show the behind the scenes grit it takes to build wealth as a real estate investor.
Also make sure to explore free resources on the web. BiggerPockets.com is the biggest real estate website online, and they even have a free forum. Brandon also recently wrote a book that might be worth checking out — The Book On Rental Property Investing.
However, it’s important to note that you don’t have to buy real property to invest in real estate. There are several ways to become a real estate investor without having to manage a property. Crowding funding real estate has exploded in the last few years with several new platforms now available. One of those options is Fundrise. With Fundrise.com, you can invest into commercial and residential real estate notes without having to deal with physical property.
Fundrise finds properties for you and lets you start investing with as little as $500. If you want to invest in real estate with less hassle and stress, this is a smart way to go.
#2: Become a Franchisee
Investing in franchises isn’t my cup of tea, but it could be yours. It’s reported that you can earn between 10% and 50% on your money by buying into the right franchise at the right time, making this a smart option to explore at the very least.
My first experience with a franchise took place when a few friends of mine decided to open a Little Caesars pizza restaurant. I really didn’t understand this at the time since there are pizza places everywhere, but I was pumped that my friends were able to open three locations within the next few years after that.
The same friends were so successful that they even expanded into another franchise from there — Sport Clips Haircuts. After that, they bought into the Oxi Fresh franchise, which is a carpet cleaning business. I haven’t followed up with them in a while, but I am still guessing they are killing it! They have continued opening more and more stores, which proves to me they are earning plenty of revenue.
Can everyone become a franchisee? Of course not. You have to have cash to invest in a franchise, and there are other requirements as well. To open a Chick-Fil-A, for example, you must have $10,000 in cash and go through a strict recruitment process. To open a McDonald’s, you need to have $1 million dollars and that doesn’t even include the working capital you need on-hand.
Before opening a franchise, it’s important to know your actual ROI which includes money invested and your time. Forbes contributor, Ed Teixeria, suggests,”…identify the personal commitment you’ll be required to make in order to build a successful franchise. It won’t make sense to work 10 to 12 hour days operating a franchise if the total financial return is not equitable.”
#3: Life Insurance
San Diego Financial Advisor Taylor Schulte told me that he thinks whole life is one of the biggest rip-off investments out there. “Most people are better off buying low-cost term insurance and investing the difference,” he said.
Still, if you have already invested heavily into the stock market, you have a Roth IRA, you max out your 401(k), and you still have money to invest, you could look at a permanent cash-value policy to maximize your wealth. Should you? Well, only you can decide.
If you’re looking for a policy that fits the bill, you’ll probably want to buy whole life insurance from an independent company. If you buy a policy from a big name, that typically means hidden fees.
Also note that a ton of shady insurance agents will try to push you into life insurance policies that pay them huge commissions! This is sad but true, so make sure to do your research and only buy a policy that makes “good financial cents”. Get it?
#4: Starting an Online Business
One of my favorite ways to build wealth is with an online business. Fortunately, there are about a million directions to go when you’re trying to build wealth online. You could sell digital products, create courses, write eBooks, or build a membership community where people pay a monthly fee.
You could build an ecommerce store that sells any kind of product. You could also become an affiliate marketer that makes money recommending and selling other products online through your link.
The cool thing about all these options is that I know people who have built real wealth with each. I have a friend who made $10,000 in one day launching an online course. I have other friends who host an online membership group for food bloggers where each of their members pays a recurring monthly fee to belong.
My friend Steve Chou from My Wife Quit Her Job started an online handkerchief store and made six figures in revenue in his first year. Steve also has digital courses and other products people can buy.
The options are nearly endless and starting an online business can also be super affordable.
Heck, I started my blog with a small upfront investment in 2008 and made money with advertising faster than I thought possible. Within a few years though, I was incorporating affiliate links and other marketing techniques. While I used to make a few thousand dollars per month with my blog, I now make over six figures per month with my website.
That’s a testament to just how profitable online businesses can be. Best of all, you can start your online business with a laptop from home and during your spare time.
If you’re looking for inspiration, you can also check out of influencers coming to the financial blogging conference known as FinCon this year. A lot of these entrepreneurs have built multi-million dollar businesses online and from scratch, so you can learn a lot by following them on social media to see how they work.
#5: Building and Selling a Business
I didn’t come from an entrepreneurial family, so I never realized that starting a business with the intention to sell was a thing. However, I now realize this is a smart strategy many entrepreneurs specialize in.
You can do this in the online business world or with a traditional brick and mortar business. Most people who flip businesses do so with the goal of boosting profitability early and selling in three to five years. Some entrepreneurs who buy and sell businesses do it over and over, often holding several different businesses at once.
Personally, I have seen how this works in the online business world. Back in the day, I bought a website called FinanceforTeachers.com for around $3,000. I’m currently bringing in some revenue for this site and trying to grow it. So, that’s a good example of someone starting a business and another person buying it for their own means.
Should you buy and sell businesses for profit? It totally depends on your skillset and your area of expertise, but it’s worth considering if you have some working capital and think you have what it takes.
#6: Pay Off Your Debt
Your net worth — the true measure of your wealth — is determined by taking your assets and subtracting your liabilities. The crazy thing is, there are plenty of people with material wealth but almost zero net worth. If you have $1 million in the stock market but also have $1 million in debt, for example, your net worth is a big fat zero.
Why? Because you owe as much as you own.
That’s why paying off your debt is such a powerful wealth-building tool. When you pay off debt and become debt-free, you are building wealth for yourself while also decreasing stress and improving your peace of mind.
Should you pay down debt instead of investing? Absolutely not. I am not advocating paying off your home and cars instead of investing. I am suggesting you do both as part of a wealth-building strategy.
Most financial advisors agree that debt is not the devil provided you’re using it to your advantage. If you want to purchase your dream home or buy a business, you will likely need to borrow money. Over all though, you are always better off carrying around as little debt and baggage as you can get away with.
The Bottom Line
There are so many ways to build wealth outside the stock market that it isn’t even funny. You can build a business, buy a franchise, start a blog, or invest in real estate. You could even come up with a totally new idea of your own.
All you need is some time, some guts, and a whole lot of discipline to succeed. If you have what it takes, nothing can stop you.
Jeff Rose is a certified financial planner, author, blogger, and Iraqi combat veteran. He is best known for my blogs GoodFinancialCents.com and LifeInsurancebyJeff.com and his book, Soldier of Finance: Take Charge of Your Money and Invest in Your Future. He escaped a path of financial destruction by being a college drop out and having over $20,000 of credit card debt to eventually become a self-made millionaire.
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