“A goal is a dream with a deadline.” -Napoleon Hill
Short and sweet, but very sound advice. For many that dream is to build wealth or create more abundance in our lives. In order to reach financial freedom it helps if we have a firm grasp on the fundamentals. Todays wealth management advice comes from Mr. Self Development and has been published here for your convenience.
6 Keys to Building Wealth
1. Have a Goal
Most people do not have a financial goal. They have no financial target! What is your financial goal? Is it $3,000,000 by December 31, 2026? You must have a goal. How can you hit a target that does not exist?
How can you aim, get focused, and strike a target that you can’t see? Decide today to set a financial goal. Give the goal a deadline, follow the other steps in this article, and soon you will be on your way to creating wealth.
2. Have an Automatic Plan
Experts claim that you must be very disciplined if you want to build wealth. However, I believe discipline is outrageously overrated. We don’t have that much discipline! Just go to your local buffet, and see how disciplined we are. Discipline is a limited resource that we possess, and should not be a primary tool in creating your wealth.
I’m not saying that you don’t need discipline; you just don’t want to depend on it on a daily basis. Instead, use your discipline to setup an automatic savings plan.
Your savings should be automatically deducted from your paycheck or automatically sent to your savings (and I’m not referring to the savings attached to your checking account). Your funds should be sent to an account, such as your 401K, where you can not readily access the funds. Out of sight equals out of mind, if you never see the money, and if you can’t access it, you won’t depend on it.
Set up an automatic savings for your retirement and a separate savings for emergencies. Your retirement funds should be virtually inaccessible. The emergency funds should be more easily accessible.
You want to sit down with a financial advisor to discuss your saving options. An “automatic plan” is all about paying yourself first! You must pay yourself first.
3. Have a Budget
This is a very simple key, but one that I would be remiss not to include.
You must have a budget! You must know the budget; you must understand the budget; you and your family must follow the budget.
The budget should also include money for taxes, vacations, and unexpected expenditures.
The purpose of the budget is to ensure that you rarely need to access your emergency funds; affording you the ability to stay on track with your financial goals and even create additional wealth from your emergency fund.
Your budget must include money for you to “blow” and enjoy yourself as well. Why work everyday and never enjoy the money that you work for! Enjoying your money will make the saving process more enjoyable.
Setup a budget that allows you to have fun with your money every month. Maybe it’s a night out on the town, maybe it’s going to the movies every weekend, maybe it’s getting a pedicure every month.
…So eliminate unnecessary expenses, attempt to lower bills, in an effort to have money to “blow.”
4. Use Cash
Unless you’re starting a business, which you know is going to succeed, avoid using debt.
Debt is a double-edged sword, it can be used to make you rich, but it can be used to bankrupt you. Save debt for business ventures where you have a significant advantage over the competition. Otherwise, just use cash; it will simplify your life.
5. Diversify Your Funds
It’s probably not the best idea to keep all of your funds in a sock, or even in your local bank’s savings account. You want to diversify!
It’s true that cash is king, but compounded interest is a greater king. You want to diversify your funds to ensure that you’re getting the best rate of return on your funds and yet staying within your comfort level for risk. Once again, you want to talk to a financial advisor to see what options work best for you.
If you put $1000 in the bank at a rate of 6 percent interest, it would turn into $44,000 after 65 years. If the interest rate was 9 percent, the $1000 would have turned into $270,000. The more time, the higher the interest rate, and the more you can afford to save, the quicker you will build your wealth.
Time is a very critical component of building wealth; some may say it’s the most important. The earlier you can start saving the more time you have for compounded interest to take effect and make you a millionaire.
6. Create Other Sources of Income
The more money you make, the more opportunities you have to save. If you have a hobby, or a passion that you can do on the side while you’re working your full-time job, then do it. You may be able to make enough from your passion to fully fund your savings.
Life is to be enjoyed, …you don’t want to just sacrifice, you want to find ways to make more money! You are a creator, so create more money from your talents, and use it to fund your wealth; if you do, you will be well on your way.
Other tips: Get married, don’t get divorced, stay out of court, keep your kids out of jail and out of trouble, start saving as soon as possible, stick to your budget, get promoted on your job, invest your passive income, don’t gamble, avoid risky investments, get the lowest interest rate on your mortgage and cars, take care of your health, and keep the proper insurance, including life insurance.
Any time we work on creating profits and multiple streams of income, we are working on securing or enhancing our financial independence. Remember not to shy away from the spending that can help earn more in the future and try not to view those little set backs (which will happen) as the end of the road. Now I’ll pass it on to you. What are your thoughts? Have you set up a financial plan or do you just wing it? Leave a comment below and let us know…
Photo by woodleywonderworks
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