I Retired Wealthy: 6 Little Known Tips To Boost Your Earnings and Savings Every Year
Many people dream of retiring wealthy, but don’t know the path to get there. Since everyone’s journey is different, there’s no one way to live life or build wealth. There are, however, some tried-and-true strategies that can help you increase your earnings and savings as you go.
GOBankingRates spoke with Paulo Peres, managing director at J.P. Morgan and founder of Agrisapien Traders, a specialty coffee importer based in the U.S. and Brazil, about his path to retiring wealthy. Here are the top things he did to boost his income and savings each year and how you may also be able to do some of them.
Also here are eight signs you will retire wealthy.
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Save and Invest the Difference
Investing isn’t a secret way to build wealth. From maxing out your 401(k) and IRA contributions to purchasing index funds or commission-free ETFs, there are virtually endless ways to get rich this way — though none are wholly without risk.
For Peres, he also invested early and often in the market. “I started saving a portion of each paycheck in my 20s,” he said.
But he didn’t just save. He also put that money in a high-yield account that earned compound interest and grew substantially over time.
Together with his wife, Peres also found ways to cut everyday expenses. Rather than spend or even simply save the difference, he found other ways to put that money to work.
“My wife and I drove average cars and lived in a modest home, investing the difference,” he said. “Over decades, it added up.”
Here’s an example of how investing in an interest-bearing account could help your money grow also.
Say you’ve found ways to cut expenses and have saved up $5,000. Now, say you put that money into an account with a 7% annual return rate that compounds annually.
If you then deposit an additional $200 a month into that account every month for 10 years, you’ll have $44,046 by the end. That’s $24,000 of total contributions and $15,036 in interest earned.
Increasing the amount you deposit, something you can do by further cutting expenses or as your income grows, can yield even greater returns over the long term. Even just increasing your monthly contributions to $400 — with all else staying the same — your end balance would be $78,256. That’s $48,000 in total contributions and $25,256 total interest earned over one decade.
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Prioritize High-Margin Niche Markets
Peres’s financial success came from years of dedication, but he also understood the importance of prioritizing quality and optimization in his business.
“To boost income, I focused on high-margin niche markets and premium products,” he said. “For example, we specialized in sustainably-sourced specialty coffees which commanded premium prices. We also optimized the supply chain and cut out middlemen to boost profits.”
You don’t necessarily have to run your own business to retire wealthy. But if you are an entrepreneur or business owner, you may also benefit from following a similar strategy — one that’s designed to work in your chosen niche, of course.
Provide Employee Incentives
Running a successful company is often a collaborative effort, one that involves providing incentives to those who could help ensure the business’s continued profitability. This was the case for Peres on his path to retiring wealthy too.
“I made sure key employees had equity stakes,” he said. “This incentivized them to think like owners, work hard and stay loyal. When we sold, their shares were worth a lot and they earned good payouts. In turn, that goodwill meant they stuck around to support the new owner during transition.”
Depending on your circumstances and goals, this may be something you could do as well. Even if you choose to go an alternative route, finding ways to work together with those who can build you up — and you can build up in turn — can go a long way toward long-term success and wealth.
Take Calculated Risks
Everyone’s risk tolerance is different, influenced by their goals, upbringing, age and other circumstances. While you may not want to take major risks when you’re older, a few calculated risks along the way could prove beneficial.
This is something Peres suggested doing, as well as something he did.
“Take calculated risks,” he said. “I left a corporate job to start a business, a risky move that paid off. After years of hard work, I sold my company and retired comfortably.”
Weigh your risk tolerance alongside your goals and personal circumstances. Whether you decide to do something similar to what Peres did or you go an entirely different route, you never know how it might work out until you do it. And if you’re not one for taking these risks, that’s OK too.
Invest in Rental Properties
Many wealthy individuals invest in rental properties. Doing this can lead to greater earnings through rental income, which can then lead to increased annual savings.
Peres said that he and his wife invested in rental properties after retiring to continue to build their wealth.
“We started with a few multi-family units, then 1031 exchanged into larger commercial properties with long triple net leases to [creditworthy] tenants,” he said. “The key was using leverage and locking in low interest rates. The cash flow from rentals now funds our lifestyle, and we still have equity upside in the properties.”
Don’t Underestimate the Power of Community
Last but not least, Peres said that another way he’s built wealth and continued to fund his wealthy lifestyle in retirement is by keeping active in the community.
“We sponsored a festival this year, gaining website traffic, new customers and enough revenue to bonus our team,” Peres said. “For others, investing in your local community by donating time or resources to events can boost your business.”
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This article originally appeared on GOBankingRates.com: I Retired Wealthy: 6 Little Known Tips To Boost Your Earnings and Savings Every Year