Wealth creation is not a complex affair that requires you to take classes in high finance. What it does require is tons of patience, discipline, dedication, and common sense. Anyone can learn the rudiments of money management; it’s how you apply them in the practical world that will determine your success rate.
Here are five basic principles to start with:
1. Make sacrifices. The people who found success in wealth creation had to make plenty of sacrifices when they were starting out. They lived within their means and cut back wherever possible. They didn’t care for labels and status. To save money, they cooked their own meals instead of dining in restaurants, bought clothes at bargain prices, got rid of their gas-guzzling cars and took the bus to work, and even cut out coupons from newspapers to take advantage of special deals and prices that would save them more money. Sounds unglamorous? Of course it does, but think of how much you’ll be able to put away if you’re consistently frugal.
2. Set aside more than ten percent of your income. One of the more important money management lessons you should apply is to save more than ten percent of your monthly earnings AND put it in a bank account that you MUST NOT and WILL NOT touch unless a real emergency constrains you to dip into that amount. Some wealth creation experts recommend ten percent savings, but if you wish to “hasten” the process of building your nest egg, then you must set aside more. Try going for fifteen or twenty percent. This should be doable if you’re willing to downsize in certain areas of your monthly spending.
3. If you’re the type to easily lend people money, now’s the time to get rid of that attitude. You won’t succeed in your wealth creation plans if you’re the type who just can’t say no to family and friends when they come to you asking for twenty dollars here, and fifty dollars there. You’ll soon realize that you have shelled out a few hundred bucks with no hope of getting back one hundred percent of that amount. This isn’t to say that you should learn to be selfish, but how can you truly help other people if your own needs aren’t met? You can’t save the world if you can’t save yourself first, but then again, you shouldn’t even be trying to save everybody! So make saying “no” a part of your money management skills. Pay yourself first!
4. Pay off your debts. Pay them off and don’t acquire more debt. One of the most critical wealth creation principles is, “If you can’t afford to pay in cash, you can’t afford to pay it with your credit card.” Don’t acquire new debt to pile on your old debt as this goes against the rules of good money management. Some people mindlessly charge every single item on their credit card – even something as simple as a sandwich – and before they know it, their next statement balance is the size of Rhode Island. Don’t fall into the credit card trap. To control your spending, use a debit card instead.
5. Don’t put all your eggs in one basket. Wealth creation should not be contained in one savings account – you need to diversify the money you’ve set aside and invest some of them. When you have a tidy sum saved up, it’s time to consult a reliable financial planner who can teach you the more sophisticated level of money management, such as investing in mutual funds, carefully selected stocks and IPOs, and money market accounts. Don’t get greedy, though. Learn from the mistakes of others – the people who invested in get-rich quick schemes that ended up being Ponzi schemes. Bear in mind that the only way you can truly become rich overnight is if you win the lottery, and that’s a big IF!
Apply the above principles as soon as you can to get an early start on building your wealth. Remember that slow and steady wins the race so arm yourself with patience and perseverance. Here’s wishing you plenty of success in your endeavors and financial stability in your golden years!