There is no one road to wealth. But you can put the odds of creating wealth on your side by following a few simple precepts.
1. Spend less than you earn. This is often 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 almost impossible for most people.
Stop looking at your budget as a fixed pie that must be cut up into different size pieces to cover your regular bills for housing, telephone, electricity, car expenses and insurance. Instead, concentrate on thinking about how you could expand the size of the pie.
Take a look at how you're spending your time, as well as your money. Perhaps instead of dining out this weekend, you could earn an extra $100 by becoming a waiter or bartender. Instead of shopping at the mall, you could be a salesclerk earning some extra cash. Instead of paying for a baby sitter, you could take care of a few other children on Saturday or Sunday, freeing working parents to do their errands. Then, instead of spending the extra money you earn, you should invest it so the money can work for you.
2. Make your money work as hard as you do. The real secret of financial success lies in making your money do the work, so you can relax. But that requires accumulating enough investment dollars so that the growth and earnings can free you from the need to punch a time clock. Many people argue that they'll never get to the point where they won't have to return to work because they can't afford to set money aside today. But don't overlook the power of compound interest.
3. Make sure your money is working for you, instead of against you. Just as your money can work very powerfully for you if you make the right decisions and stick to a plan of regular investing, wrong money decisions put potholes on the road to success. The classic example is credit-card debt.
4. Remember: If you don't see it, you won't spend it! If you take a close look at your paycheck, you'll notice a lot of deductions before you get to the amount you can cash or put in the bank. Money set aside for wealth building should be treated in the same way.
5. Create savings and investment goals. Set your own goals. But 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 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 job that pays commissions instead of a fixed salary.
Yes, these are certainly simple. But in the world of money management, simple steps are often the most effective.
