Wealth Creation Principles
Wealth creation is not a complex business that requires taking courses in high finance. What it takes is tons of patience, discipline, dedication, and common sense. Anyone can learn the basics of money management; it’s how you apply them in the practical world that will determine your rate of success.
Here are five basic principles to get started:
1. Make sacrifices. People who have succeeded in creating wealth had to make a lot of sacrifices when they started out. They lived within their means and reduced as much as possible. They didn’t care about labels and status. To save money, they cooked their own meals instead of dining out, bought cheap clothes, got rid of their gas-guzzling cars and took the bus to work, and even cut coupons out of newspapers to take advantage of special offers and prices that would save them more money. Sound unglamorous? Of course you are, but think about how much you can save if you’re constantly frugal.
2. Set aside more than ten percent of your income. One of the most important money management lessons you should apply is to save more than ten percent of your monthly income AND put it in a bank account that you DO NOT owe and will NOT touch unless a true emergency does require you to dip into that amount. Some wealth building experts recommend saving ten percent, but if you want to “speed up” the process of building up your nest egg, you need to put more of it aside. Try going for fifteen or twenty percent. This should be doable if you are willing to reduce your monthly expenses in certain areas.
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-building plans if you’re the type who can’t say no to your family and friends when they come asking you for twenty dollars here and fifty dollars there. You will quickly realize that you have paid a few hundred dollars with no hope of recovering one hundred percent of this amount. That’s not to say you should learn to be selfish, but how can you really help others if your own needs aren’t being met? You can’t save the world if you can’t save yourself first, but then again, you shouldn’t even try to save everyone! So make saying “no” part of your money management skills. Pay yourself first!
4. Pay off your debts. Pay them back and get out of debt. One of the most critical wealth building principles is, “If you can’t afford to pay cash, you can’t afford to pay with your credit card.” Do not acquire new debt to accumulate your old debt as this is against the rules of good money management. Some people mindlessly charge every item to 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 a single savings account – you should diversify the money you have set aside and invest some of it. When you’ve saved a tidy sum, it’s time to consult a reliable financial planner who can teach you the most sophisticated level of money management, such as investing in mutual funds, stocks and IPOs carefully. selected and money market accounts. Don’t be greedy, though. Learn from the mistakes of others – people who invested in get-rich-quick schemes that ended up being Ponzi schemes. Keep in mind that the only way to truly get rich overnight is to win the lottery, and that’s a big IF!
Apply the above principles as soon as you can to start building your wealth early. Remember that slow and steady wins the race, so arm yourself with patience and perseverance. I wish you much success in your endeavors and financial stability in your golden years!
