Everyone can become wealthy, it just depends on your own personal definition of wealth. If you want to build wealth, you need to learn the fundamentals of saving and investment. Most wealthy individuals either inherited their wealth or worked hard to accumulate it. If you are one of those that did or will inherit your wealth, this article isn’t for you. But if you are like the majority 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 wealth creation. 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 a tax break and you may even get 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 to have more money than they know what to do with. For most, it can be defined as – “Doing what you want, when you want to with friends and family…. and life is affordable, while work is optional.” If you can envision this lifestyle, you probably would agree, this would make you a wealthy individual. What it takes to reach this goal is different for everyone that pictures it. It depends on your location, your desired spending habits, your genetic longevity and multiple other factors. But to achieve it, you need a plan and each of the following components can help.
Investment Program: Nearly all wealthy individuals will agree that you need to have a sound investment program if you plan to have sustainable wealth. If you can generate enough investment income to maintain your desired lifestyle, work becomes optional. Building a well-balanced, diversified portfolio with a proper asset allocation strategy makes it all work smoothly. But how do you get there?
Accumulation Program: Your first step is to develop a strategic accumulation 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 broadly 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 figure out what amount you can afford to invest each year. Then break that number down to a weekly, monthly or even a daily figure that you can begin putting to work. When you break down the numbers to a daily figure, you may even find ways to save more. Foregoing the $3.00 Starbucks coffee can save you as much as $1,000 each year. That $8.00 pack of cigarettes each day could save almost $3,000 annually. Little changes can have a big impact on your wealth expansion efforts.
Once you figure out your desired annual accumulation goal, it is time to get those dollars systematically placed into your chosen investments and let them start building your wealth.
Automatic Program: The biggest problem most individuals have once they figure out how much to accumulate is finding the discipline to set aside those dollars each and every 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 a payroll deduction directly to your brokerage or mutual fund account. Most big corporations will and many small companies will too.
If not, set up an automatic monthly electronic transfer from your checking or savings account directly into 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 nearly all banks do. Once you start saving, you will be able to see regular and substantial improvement in your net worth and wealth creation.
Summary: Any successful wealth building program requires discipline, planning and in many cases, decisions to make small sacrifices to attain the bigger goal. One of the most important factors that is common to all wealthy individuals is that they have found ways to live comfortably below their means and then they invested the rest. Please read this statement again. If you can find a way do this, you will become wealthy and enjoy a financially and emotionally rewarding life.