Whether it’s Long-Term Care expenses later in life or college early in life, there are always things to consider ahead of time.
If you’re living from paycheck to paycheck, hand-to-mouth, then you’re living the wrong life. So many people spend their entire life in pursuit of financial freedom. In his book, The Science of Getting Rich, Wallace D. Wattles says “the fact remains that it is not possible to live a really complete or successful life unless one is rich”. Wealth building is a journey for which you need a starting point. Below we explore 3 fundamental strategies to achieve exponential wealth.
#1 Earn more, spend less
To build wealth, you must spend less than you earn. It’s that basic: earn money, spend less than you earn in, save, invest and repeat. In writing, this sounds like a simple set of steps. But it has proved to be an implementation challenge for so many wealth seekers. The good news though is that a simple change of lifestyle is all you need to adapt and ingrain this basic strategy in your daily routine. To make sure that you’re spending less than you earn, start by analyzing your financial habits to identify spending loopholes. You may use an online expense tracking tool to see where your money is going. Once you get this figured out, make a budget and stick to it. You need a lot of discipline to make this happen.
Also build a 3-6 months emergency fund that can take care of your family in the case of any unexpected disasters or expenditures.
#2 Utilize personal finance software
Technology makes it so easy for you to keep tabs on your income and expenditure, as well as track your wealth-building progress. There’s an abundance of personal finance software available out there, from Mint (which works on Mobile and PC) to Moneydance and Personal Capital. It’s difficult to accumulate wealth if you have no clear idea where you stand right now. A good personal finance software helps you actualize the ‘earn, spend less, save and invest’ approach highlighted above. Choose a personal finance tool that suits your money style. For instance, Moneydance will do just fine if you prefer a tool that emulates an old-school ledger, and issues automatic bill reminders and entries.
#3 Invest wisely – Insurance and Investments are Different!
Now that you’re making enough money and saving even more of it, it’s time to invest. But there’s also the need to protect, with insurance. Most people splash their savings into conventional investments, and this is where they err. If you’re serious about building a sizeable wealth portfolio, you have to take a risk. Peter Lynch, American multi-millionaire and mega-investor, recommends that you should ‘buy what you know’. Similarly, billionaire Warren Buffet has said that he stuck to investing in stocks within his ‘circle of competence’. It’s absolutely important that you do your own (rigorous) homework before you risk your hard-earned savings. Ignore the circus and be a laser-focused investor. You probably have been to one of those all-you-can-eat buffets where people littered their plates with all manner of salads, entrees, appetizers and desserts. A lot of people tend to invest in a similar fashion. Every new ETF, fund or investment that comes along the way gets a slot in their investment to-do list. Keep it sharp and simple!
Successful investors are smart enough to safeguard their investments from risk. They insure their assets and purchase covers such as Long Term Care insurance to protect their nest egg from life’s uncertainties.
Wealth building is a habit; you need all the discipline and patience that you can master. If you expect to get rich in a year, you probably are better off buying a lottery ticket. If you’re determined to do what it takes, these wealth accumulation tips should provide a solid foundation of knowledge for you.
