By Brian Halim (guest contributor)
Many believe there is a great secret to becoming wealthy. Few realize
that the simple basics are all you need to build wealth. The “secret”
to wealth is not much of a secret. A variety of simple concepts and
actions can be applied to achieve prosperity. Follow the following six
steps and you will be on your way to building your wealth.
1. Spend less than you earn
The number one rule of personal finance is this: You cannot spend
more than what you earn. You must live within your means, and take care
that you never outspend your income.
2. Reduce Debt
Pay down your debt, and you free up resources that can be used to
improve your net worth. If you are leveraging on your loan, repay your
loans diligently. Reduce the amount of interest you pay, and instead use
that money to your advantage.
3. Grow Income
If you want more, you need to earn more. Look for ways to grow your
income. Maximize the lifetime earnings of your career as well as seek
non-career options to profit like part-time jobs. Staying overtime in an
office that does not pay you extra will not help you, unless it will
lead to a promotion.
4. Save for the Future
Your emergency fund can protect you against financial setbacks or unforeseen emergencies. Be prepared and stay calm.
5. Invest in Yourself
Wealth also depends on your human capital. Invest in yourself by
getting an education, and/or developing a skill. It does not necessarily
need to be a degree. All you need is a marketable skill, or a knowledge
base that can help you improve your finances.
6. Play Good Defense
Be sure to avoid the worst finance mistakes that people make. They
can derail your gains and even ruin all of the hard work you put in to
grow your net worth. When reading the above actions, it is easy to dismiss them. If it
were so easy, everyone would be wealthy. The steps that lead to wealth
are simple concepts. Applying these concepts is much harder.
7. Building Blocks of Wealth: Discipline, Patience, and Persistence
In addition to the steps above, you also need to develop three
qualities to ensure maximize the chances that you will achieve wealth.
7(a). Discipline
Discipline requires a measure of self-control in expenditure. Rather
than buying everything you want, prioritize and purchase only what is
important to you. This will help get rid of debt and build your savings. Earning money requires discipline. Growing your income means that you
have to get up early and do extra work. Occasionally, you might have to
complete tasks you find unpleasant. Knowledge and skills too are
acquired only after you exercise the discipline to study and to practice
them.
7(b). Patience
In today’s world, we are bombarded with promises of instant
gratification. We want that expensive car now. You can have your
vacation with a credit card. A 60-inch television can be yours if you
qualify for in-store financing. The inability to wait and save up the
money for what we want leads to debt and financial insecurity.
Results require time. A good emergency fund takes months, or even
years, to build. Dollar-cost averaging in your investment portfolio
requires decades of patience.
7(c). Persistence
Persistence is the ability to keep with your wealth-building efforts.
It is easy to give up when you do not see quick results, or when you
see your neighbors enjoying their over-leveraged lifestyles. However, in the long run, those neighbors are likely to have very
little wealth, since most of the goods they enjoy have been bought with
debt. It is hard to see that when everyone around you is having fun
while you follow a more practical course. But stay the course.
Take action now. There will be many temptations along the way. It is
up to you to decide which path to take. Follow the simple concepts of
building wealth with discipline, patience, persistence, and you will
achieve financial freedom. The concepts behind wealth are that simple, but it takes hard work to put them into practice.
By guest contributor Brian Halim, a professional accountant who blogs at A Path to Forever Financial Freedom. Posted via www.MoneyMatters.sg, your guide on how to make more money, save smarter, invest intelligently, and enjoy your money like a pro. Click here to get our free report on what you must know about financial freedom.
Clement Jouling ialah Perunding Unit Amanah berlesen (Licensed Unit Trust Consultant). Sekiranya anda berminat untuk mengetahui lebih lanjut tentang pelaburan unit amanah, boleh hubungi beliau terutamanya buat anda yang berada di Kota Kinabalu dan sekitarnya.
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