Avoid much debt, it could impede your progress towards your wealth-building goals

– CEO Taraba Business School

Emmanuel Awari-Jalingo

Tarabans have been called upon to manage their resources and avoid taking too much debt.

The Chief Executive Officer CEO, Taraba Business School, Gabriel Olayinka made the call while delivering a Paper tittled: SEVEN PRINCIPLES OF BUILDING A SUSTAINABLE WEALTH, held at the Patient events center, Jalingo.

“It is important to manage your debt carefully—taking on too much debt could impede your progress toward your wealth-building goals.

“To manage debt, be mindful of your debt-to-income (DTI) ratio and make sure that your debt payments are manageable within your budget.

“You should also aim to pay off high-interest debt, such as credit card debt, as quickly as possible to avoid paying excessive interest charges.

“Be wary of variable or adjustable interest rate products like adjustable-rate mortgages (ARMs) or those with balloon payments, as changes to the economy or your personal circumstances can quickly cause those debts to become unmanageable.

Indeed, if you fall into debt, your credit score can be negatively impacted, and if you default on your debts, you could face personal bankruptcy.

According to him, Maintaining a Good Credit Score, Building and maintaining a good credit score is an important part of growing and preserving your wealth over the long term.

“You’ll enjoy a lower interest rate and better terms on your loans if you have a strong credit history and high credit score, which can save you thousands of dollars in interest charges over time.

He gave few key steps that one needs to take to maintain a good credit score, which includes,

Payment of bills on time.

“One of the most important factors that affect your credit score is your payment history.

“To maintain a good credit score, you should make sure to pay your bills on time, every time.

“Late payments, even if they’re only a few days late, can have a significant negative impact on your credit score.

“Your credit utilization, or the amount of credit you’re using compared to the amount you have available, is another important factor that affects your credit score.

“To maintain a good credit score, you should aim to keep your credit utilization below 30% of your available credit.

Monitoring credit report.

“It’s a good idea to check your credit report regularly to make sure that all the information is accurate and up to date. Today, several services will provide you with a credit report free of charge.

“Errors on your credit report can negatively impact your credit score, so it’s important to dispute any inaccuracies you find.

Avoiding opening too many new accounts.

“Every time you apply for credit, it can have a slight negative impact on your credit score.

“To maintain a good credit score, you should avoid opening too many new accounts in a short period of time.

“Note, however, that if you do not use credit cards or don’t have enough credit lines open, you may fall victim to having an insufficient credit history.

“So, open some credit cards and take out some loans, but do not overdo it.

He said that by following these steps and practicing good credit habits, one can maintain a good credit score and maximize your borrowing power over the long term.

“Should I Pay Off Debt or Invest?

“If you have high-interest debt, such as many credit card charges, it usually makes sense to pay it off before you invest.

“Few investments ever pay as much as credit cards charge. Once you’ve paid off your debt, redirect that extra money to savings and investments.

“And try to pay your credit card balance in full each month, whenever possible, to avoid owing interest in the future.

“How Much Money Do I Need To Buy a Mutual Fund?

“Mutual fund companies have different minimum initial investment requirements to get started, often beginning at about $500.

“After that, you can usually invest less. Some mutual funds will waive their initial minimums if you commit to investing a regular sum each month.

“You can also buy mutual fund and exchange-traded fund (ETF) shares through a brokerage firm, some of which charge nothing for opening an account.

What Is an Exchange-Traded Fund (ETF)?

“Exchange-traded funds (ETFs) are investment pools much like mutual funds. A key difference is that their shares are traded on stock exchanges (rather than bought and sold through a particular fund company).

The CEO said that financial institutions sometimes charge lower fees as well.

“You can also buy them, along with stocks and bonds, through a brokerage firm.

“The Bottom Line
While get-rich-quick schemes sometimes may be enticing, the tried-and-true way to build wealth is through regular saving and investing—and patiently allowing that money to grow over time. It’s fine to start small.

“The important thing is to start and to start early. Earn money and then save and invest it smartly.

“Protect your assets with insurance and minimize your tax exposure.

He pointed out that building wealth is a journey, not a destination.

“Celebrate your successes along the way, and don’t get discouraged by setbacks or obstacles.

“With patience, discipline, and a clear vision of your goals, you can achieve financial success and build wealth over the long term.
Minimize the Impact of Taxes.

“Of course, we are all subject to income tax and sales tax as we earn and spend money, but our investments and assets can also be taxed.

“That’s why it is essential to understand your tax exposures and develop strategies to minimize their impact.

He disclosed that investing in tax-advantaged accounts is one easy way to minimize tax bill.

“These accounts, such as 529 college savings plans, individual retirement accounts (IRAs), and 401(k) plans, offer tax benefits that can help you save more money and reduce your tax bill.

“For example, contributions to a traditional IRA or 401(k) are tax-deductible, meaning you can reduce your taxable income and save money on taxes in the year when you make the contribution.

“Also, they grow tax-deferred, meaning that the impact will be smaller when you retire and are more likely to be in a lower tax bracket. Investment gains in a Roth IRA or Roth 401(k) are tax-exempt, meaning that you can grow and withdraw money in a Roth account without paying taxes on any of the income or gains.

“Another strategy for minimizing taxes is to be mindful of the timing and location of your investments.

“By holding investments for more than a year, you can take advantage of the lower long-term capital gains tax rate, which is generally lower than the short-term capital gains tax and income tax rates

“Also, keep in mind where certain assets are held. Given a choice, an income-producing asset like a dividend-paying stock or corporate bond should be placed in a tax-advantaged account like a Roth IRA, where these payments will not trigger taxable events.

He advised the public to consider talking with a qualified tax professional, such as an accountant or a certified public accountant (CPA), who can help develop a tax strategy for specific financial situation.

“By minimizing the impact of taxes, you can build wealth more effectively and preserve more of your hard-earned money over the long term.

“Being deliberate in Planning for your future
What you will use your wealth for?

“Do you want to fund your retirement—maybe even an early retirement? Pay for your kids to go to college? Buy a second home? Donate your wealth to charity? Setting goals is an essential step in building wealth.

“When you have a clear vision of what you want to achieve, you can create a plan to help you get there.

“Start by defining your financial goals, such as saving for retirement, buying a home, or paying off debt. Be specific about how much money you need to achieve each goal and the time frame you hope to achieve it.

“Once you have set your goals, you should develop a plan for achieving them. This may involve creating a budget to help you save more money, increasing your income through education or career advancement, or investing in assets that will appreciate in value over time. Your plan should be realistic, flexible, and focused on the long term. Regularly review your progress and adjust as needed to keep yourself on track.

“Building Capacity to handle a Sustainable Wealth.

“Protect Your Assets
You’ve worked hard to earn your money and grow your wealth.

“The worst thing could be to lose it all due to a sudden tragedy or unforeseen event – he said.

“Insurance is key to building your wealth because it protects you from hazards.

“Home insurance will replace your home and belongings in case of a fire, auto insurance will make you whole after a car accident, and life insurance will pay your beneficiaries a death benefit in the case of an untimely death.

“Long-term disability insurance is another type of policy that will replace your income if you become injured, ill, or otherwise incapacitated and unable to continue working. Even young, healthy people should consider insurance products since they tend to become more expensive as you grow older.

“That means even if you are 25 years old and single, buying life insurance could be much more cost-effective than when you are 10 years older with a partner, children, and mortgage – he concluded.