Step 1: Start Saving Now
Spend only 9 out of each 10 dollars earned. By saving one-tenth, your bank balance will start to increase, your debts will reduce and you will build a capital base for worthwhile investments in the future. Make sure you automatically save 10% of your earnings each month. You can do this by standing order with your bank. This is like paying yourself first before you even pay all your expenses. I’ve heard it said many times that “getting rich is not about making money, it’s about keeping money”. This is a crucial first step on your journey to building wealth.
Step 2: Control Your Expenditures
Budget your expenses. No matter how much money you earn each month, make sure you have enough money to pay for your necessities – food, shelter, clothing etc. Even already rich people have a problem obeying this principle and can sometimes end up broke as a result. So, only gratify your non-essential desires if you can do so without spending more than nine-tenths of your earnings. Wealth building requires discipline and self-control. You must continue to save one-tenth of what you bring in no matter what. This is the key to building some capital which you can then use to invest.
Step 3: Make Your Saved Money Multiply
As you start to build up your savings, invest that money so that it makes more money for you. Put each dollar to work. Don’t leave your savings sitting dormant in a bank account (unless it’s a very high interest rate savings account!). Worse still, don’t leave it under your mattress depreciating in value! To build wealth it is not enough just to save money. You must put your saved money to work. Seek out investments opportunities that give you a higher return on your money than at least the rate of inflation. Now money is beginning to work for you rather than you working for money.
Step 4: Guard Your Money from Loss
Guard your money from potential loss by investing only in things where the principal is safe and where you can get at least a fair return. Seek the advice of those experienced in the profitable handling of money and be wary of following friends and relatives into so-called investment opportunities. Educate yourself and research your investments thoroughly before parting with your hard-earned money. The first rule of making money is never to lose it!
Step 5: Own Your Own Home
You should own your own home rather than renting and handing over money to a landlord. This makes sense so long as the repayments to the bank more or less match the rental you would have given the landlord. In addition, owning your own home is good for your sense of pride and potentially raising a family. So owning your own home can enrich your life on many levels.
Step 6: Ensure a Future Income
One day your current earned income will stop! Therefore, you must create wealth for your future. You should, when you are young and have the ability to earn, make preparation for a suitable income when you are older and possibly retired so that you can provide for your own needs whilst growing older and that of your family upon your passing. Contributing to a pension (or 401(k) plan) and investing in property are great long-term wealth building strategies.
Step 7: Increase Your Ability to Earn
You can increase your ability to earn by taking more interest in your work, having more concentration upon a task and more persistence in your effort. Paying debts down fast and taking care of family and friends is also essential and will increase your ability to earn money. Essentially, the wiser we become, the more we may earn. Becoming wiser and more skilful engenders a keen sense of self-respect which will ultimately cultivate greater wealth.