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5 Ideas for Building Wealth in 2011

We’re into another year, and you probably have some New Year’s resolutions aimed at building wealth. Many people, though, find themselves behind in their goals at this point in the year. Even if you have gone off track a little bit, it’s not too late to get back on the right path. There are a number of actions you can take to improve your financial situation for the rest of the year.

If you are looking for some wealth-building ideas, you might try one (or all) of the following five actions to help you take a few more steps down the road to financial freedom:

1. Pay Down Your Debt

One of the first rules of building wealth is keeping your own money. That is hard to do when you are making interest payments. Interest is money you pay for the privilege of borrowing. When you pay interest, you aren’t getting anything of real value in return; you are simply lining someone else’s pockets. If you want to keep more of your money, and use it to build wealth, you have to first get rid of your high interest debt.

Credit card debt can be especially damaging, with its high rates and low minimum payments that keep you paying for years. Pay down your debt [3] as quickly as you can, reduce what you are giving away to others in interest, and keep more of your money.

2. Educate Yourself About Money

Building wealth isn’t just about having money. It’s also about knowing how money works so that you are earning interest rather than paying it. Learn about different ways that money can be put to work for you. Find out about different investments, and learn about risk. Consider your own risk tolerance, and how you can use appropriate risk to create a portfolio that helps you reach your wealth goals. 2011 is a great time to learn about money.

3. Increase Your Savings

Begin increasing your savings. Whether you need to get a little more money in your emergency fund, or boost your retirement savings [4], try to put more in. This is especially important if your employer offers a match and you aren’t taking full advantage of it. Don’t leave that free money on the table. Even if you aren’t getting the advantage of a match, putting extra money in savings is a good idea. The power of compounding interest can help you in the long run. While you can find the extra funds by cutting back on expenses, you should also consider that you are getting a FICA tax break this year. Your paycheck should be a little bit bigger each month. This is money you should use to boost your savings.

4. Begin Building an Income Portfolio

If you are looking to create an alternative income stream, you might consider putting together an income portfolio. This is a portfolio comprised of investments that offer regular payments to you. In many cases, an income portfolio is comprised of dividend stocks [5] and/or bonds. You can also invest in income funds. You will receive regular payments, which can be used to shore up savings, or be invested elsewhere.

5. Start a Home Business

Technology offers a number of opportunities to create wealth. You can start a home business with little more than a computer and a high speed Internet connection. From starting a web site to operating an online storefront to freelancing to offering your services as a virtual assistant, it’s possible to start a side job. You can create a stream of income that will help you to build wealth.

With some practicality and a little creativity, it is possible to improve your financial situation. What will you do to build wealth in 2011?