What about Wealth Creation
The wheel of creating wealth
Tilt the wheel of creating wealth in your favour. Naturally, spending less is one way. However, to be sure to make your money work harder for you—set goals to make certain it happens.
Many have wondered what can be the foolproof way of creating wealth. Is it to buy top paying Internet stocks or to work for a tech startup that offers you valuable stock options? Is the trick to count every penny or is the road to wealth paved with risk? Do you have to be especially smart and well connected? Alternatively, is becoming wealthy a matter of luck?
The answer is: There is no one, true road to wealth, and all of the above have created wealth for more than just a few notable individuals. Nevertheless, you can put the odds of creating wealth on your side by following a few simple precepts.
Spend less than what you earn.
This can be the most overlooked scenario, because many people believe it’s a matter of cutting back on your current standard of living—a strategy that’s far too difficult for many people. Yes, you can affect your personal balance sheet by spending less money eating out or on entertaining out. Making a pot of coffee at the office instead of buying a $3 espresso will make a small difference in your cash flow. Nevertheless, the biggest difference will be made on the income side of the ledger.
If you wish to get on the right road to saving, stop looking at your budget as a pie that must be cut up into various size pieces. Instead, of trying to figure out how the different pieces will cover your expenses, concentrate on how you will expand the size of the pie. Yes, you could ask your boss for a raise. At the same time, figure out how you can begin to earn more money on the side. Start thinking about how you will sweeten the existing pie.
Think about how you’re spending your time, as well as your money. Perhaps instead of taking the family out this weekend, you could earn an extra $80 by becoming a waiter or bartender. Instead of taking the kids shopping at the mall, you could work as a salesclerk earning some extra cash.
If you don’t wish to work every weekend, think about working every other weekend to start. Instead of paying for a baby sitter while you attend a concert, take care of a few other children on Saturday or Sunday, freeing working parents to do their errands. When it comes your weekend to work, do a switch. This will save you time and money.
Then, instead of spending the extra money you earn from your part-time work, you can invest it so the money can work for you. When you do this, you will learn to appreciate your free time that much more.
Make your money work for you.
The ultimate secret to financial success lies in having your money do the work, so you can relax. This requires accumulating enough investment dollars so that the growth and earnings can free you from the need to work even harder. The last thing you will want to be doing is punching a time clock.
Plenty of very wealthy people continue on working simply because they enjoy what they’re doing so much. They also redefine work to include managing their money. For the wealthy, the two can go hand in hand.
Everywhere you go you will hear, “I never get to the point where I won’t have to return to work because I can’t afford to set money aside today.
Be sure your money is working for you, instead of against you.
Your money can work very powerfully for you if you make the right decisions and implement a plan of regular investing. At the same time, wrong money decisions will place deep potholes on your road to success.
The classic example is credit-card debt. Consider the example of a person who charges $2,000 on a credit card at 19.8% interest and a $40 annual fee. If you make only the minimum monthly payments (and many people do just that), it will take you 31 years and two months to pay off the balance! Moreover, along the way, you’ll pay an additional $8,202 in finance charges. This is absurd logic!
What could possibly be so important to charge today that it puts you in debt for a period far longer than the object is likely to last? (Sure, a mortgage lasts 30 years, but the interest is deductible and your home should grow in value over that time.) Most things that you want to charge on your card have a far shorter life. For many, they can do entirely without that one purchase.
If you’re already in debt, if you would only double the minimum monthly payment, you could be out of debt in less than three years. Paying down current debt is the smartest way to start on the road to financial freedom.
Keep a tight clasp on that wallet
When you take a close look at your paycheck, you’ll notice many deductions before you get to the amount you can cash or put in the bank. Surely, there are deductions for Social Security, federal, and perhaps state income taxes.
It’s money that’s out of your paycheck before you have a chance to even make decisions about it. Money set aside for wealth building should be treated in the exact same way. If your company offers a 401(k) retirement plan, make sure you sign up for the maximum possible contribution. It will be taken out of your paycheck, each pay period, automatically. (And if your company matches all or part of your contribution, failing to sign up is like walking away from free money!)
If you didn’t have a chance for automatic deductions to a company savings plan or even a U.S. Savings Bonds payroll deduction plan, then you’ll have to create your own automatic savings plan. Ask if your company will deposit your paycheck directly into your bank account—or promise yourself to do it the day you receive the check.
Then sign up for an automatic monthly deduction plan with a mutual fund company to create regular deposits into an IRA. You can even set up an automatic deduction for U.S. Savings bonds at its Web site. The whole point to this is to get the money out of your checking account as quickly as possible, before you see it and spend it.
Create money savings and investment goals.
Would you like to have $1 million by the age of 40 or 50 or by the time you retire? Sure you would!
Begin by setting your own goals. Never set a goal you can’t control. Your targets can’t depend on your boss giving you a raise; they must be reachable by your own efforts. You might need to invest in yourself by acquiring more education or training so you can qualify for a job that pays more.
You might need to take more risk in your investments or in your lifestyle by taking on a second job that pays commissions instead of a fixed salary. Evaluate the risks involved, and understand that by putting the odds on your side, you can get a larger return.