Let’s talk financial success. Financial abundance is what everyone seems to be seeking in this down economy, yet it’s something that is eluding the majority of the population. You most likely have heard that there is a certain percentage that you should save from your income. Some financial advisors will tell you to save 10%, and others 25%. The game changer, however, comes with what you do with these savings. This is the difference between just saving money and building wealth. It is important to note that true, and sustainable wealth is not something you can make quickly. It is something that takes discipline and patience. Here are a few methods you can use to create long-term wealth.
1. Boost your income
This step might seem rudimentary, but it is the most fundamental step for those starting out. Many of us have been shown tables of how saving a small amount regularly can be compounded over time to give you a substantial amount. What these charts do not indicate is whether you are making enough to save up in the first place. It is important to consider these points to determine how you can get to boost your income:
- Find what you are good at and think about how you can use that talent to make money.
- Think about what you enjoy. You are more likely to succeed if you do something that you enjoy.
- Using what you enjoy, consider careers in that lane that will meet your financial expectations.
- Now, consider what it will take to get there. The educational requirements or training you need.
When you are making money, it is easy to spend most if not all of it. The reason one is not saving enough is that your wants and needs always surpass what you have budgeted. Developing a habit of constant saving is important. It’s important to have a substantial amount saved up for the future. Some financial experts say you should save up to 30% of your earnings. When you make more, the larger the percentage you can save. It’s important to have a cash cushion because you can face unexpected expenses and avoid debt. When you are a disciplined regular saver, you can use this money on large purchases when a good deal comes by.
3. Budget your money
When you spend more than the amount you had budgeted for, there is a problem. Going over budget is a behaviour trend that is hard to stop when you get accustomed to it. To develop a working budget, you might want to;
- Track the way you spend for at least a month. If you find that doing this on your own is hard, you can always use a financial software package. Make certain that you can categorize your expenditures and see where your money is going.
- Cut down on the spending. It is advisable to separate your wants from your needs. Find creative ways to cut out the unnecessary spending. This will leave you with much more to save and build a cash cushion for about six months worth of living expenses.
- Do not buy crap. Before you buy anything, ask yourself if you need it. Most times you will find out that you do not. This will help you curb impulsive buying.
4. Invest the savings appropriately
When you make money, save it up, and invest conservatively, you most likely think you are doing the right thing. However, you are not. Whenever anyone wants to build a substantial portfolio, you have to take risks. This means that you venture into entrepreneurship or invest in equity. As the saying goes, when there is no risk, there is no reward. By being an employee, there are many restrictions that you might face. When you have saved enough, you can always make the leap to either be an investor or a business owner. Many self-employed people say that within their first year of being their own boss, they spot about a 30% increase in annual income.
This might be a cliché, but it is important not to put all your eggs in one basket. It is important to invest your fixed income exposures and equity over a range of investments within your portfolio. This will help you manage your risk and exposure. The rationale used here is that when a portfolio has different kinds of investments, it will have higher yields at lower risks than that of an individual investment in a portfolio.
Building wealth over time depends on how successfully you implement these five steps. The path to wealth is paved with thorough planning and a relentless execution of the said plan. Anyone who stays on this course, will without a doubt, be a wealthy and successful person.