Anyone can get rich, it just depends on your own personal definition of wealth. If you want to build wealth, you must learn the basics of saving and investing. Most rich people either inherited their wealth or worked hard to accumulate it. If you are one of those who inherited or will inherit their wealth, this article is not for you. But if you’re like most of us, read on and learn how to build your own private wealth and enjoy financial independence.
Follow the outline below and you will begin the process of building wealth. For most people, it doesn’t happen overnight, but it can easily happen over time. Surprisingly, the more wealth you create, the easier it is to create more wealth. Using a company 401K plan is a great way to build wealth, plus it’s tax-exempt and you can even earn a company matching contribution. Always start with these programs first and then move on to your personal investment program.
Wealth Defined: For some, the definition is having more money than they know what to do with. For most, it can be defined as: “Do what you want, when you want with friends and family… and life is affordable, while work is optional.” If you can imagine this lifestyle, you would probably agree, this would make you a rich person. What it takes to reach this goal is different for everyone who envisions it. It depends on your location, your desired spending habits, your genetic longevity, and many other factors. But to get there, you need a plan, and each of the following components can help.
Investment Program: Almost all wealthy people will agree that you must have a solid investment program if you plan to have sustainable wealth. If you can generate enough investment income to support your desired lifestyle, the job becomes optional. Creating a well-balanced, diversified portfolio with a proper asset allocation strategy makes everything run smoothly. But how do you get there?
Accumulation Schedule: Your first step is to develop a strategic build plan. It is always best to start early in life and start small. There is a learning curve that you can only master with experience. No-load mutual funds are a great way to get started. They have a low initial investment, are widely diversified, offer liquidity, equity exposure and professional management. You can start with as little as $100 and add whenever you want.
Systematic Program: Your next step should be to find out how much you can afford to invest each year. Then break that number down into a weekly, monthly, or even daily figure that you can start putting to work. When you break down the numbers into a daily figure, you can even find ways to save more. Giving up the $3.00 Starbucks coffee can save you up to $1,000 each year. That $8.00 a day pack of cigarettes could save almost $3,000 a year. Small changes can have a big impact on your wealth expansion efforts.
Once you determine your desired annual accumulation goal, it’s time to systematically put those dollars into your chosen investments and let them start building your wealth.
Automatic program: The biggest problem most people have when knowing how much to accumulate is finding the discipline to set aside those dollars each week or month to make it happen. There are several great ways to do this. Ask your employer if they will allow you to set up payroll deduction directly to your brokerage or mutual fund account. Most large corporations will and many small businesses will as well.
Otherwise, set up an automatic monthly electronic transfer from your checking or savings account directly to your brokerage or mutual fund account. This can be done directly with your fund company or broker and any bank that participates in the EFT (Electronic Funds Transfer) network, which is what almost all banks do. Once you start saving, you will see a regular and substantial improvement in your net worth and wealth creation.
Resume: Any successful wealth building program requires discipline, planning and, in many cases, decisions to make small sacrifices in order to reach the larger goal. One of the most important factors that is common to all rich people is that they have they found ways to live comfortably below their means and then invested the rest. Please read this statement again. If you can find a way to do this, you will become rich and enjoy a financially and emotionally rewarding life.