Have you heard of the saying “ the rich get richer while the poor get poorer?” Unfortunately, there is some truth to this statement. The wealthy stay wealthy because they have learned to understand and master their finances. Those in lower economic situations desire wealth but aren’t using the right tools and techniques to climb the money ladder.
If living a wealthy life is something you aspire to do, follow these secrets on spending, investing, and other lifestyle techniques to help you earn the wealth you desire.
1. Spending
Spending money is an essential part of life. If you want to eat, live in a comfortable home, or go places then you have to spend money. However, there are certain types of spending that will keep you living paycheck to paycheck and prevent you from building wealth. Here’s how to adjust your spending so that you end up with more money in your account.
Stop spending money you don’t have
You may be questioning how it is possible to spend money that is not in your bank account. This can happen in two main ways. One, you spend money on items of vanity and luxury that should be spent on necessities.
The second way is you borrow money by relying on credit cards and loans. Luckily there is a way to stop this disastrous spending and use your money wisely.
Start creating money goals
When you create goals for your money, it makes it easier to stop buying unnecessary things. Examples of money goals can be saving for a week-long vacation, having an emergency fund, or saving for house renovations. The next time you want to spend money on an outfit you’ll only wear once, think about how that money can help you meet your goals.
Pro tip 1: Adopt the 30-Day Rule before making impulsive purchases
We are all humans and impulsive spending happens to everyone. If you start to notice that you’re buying things that you have no need for, try the 30- day rule. According to Indiatimes.com, when you see something you want, tell yourself to wait 30 days. If it’s truly important you’ll remember to go back for it in 30 days. If it’s not important you’ll forget about it.
Pro tip 2: Don’t floss
Emma Foulkes, CFP, CRPC, and Cofounder of Collective Wealth Partners suggests that as your income increases, keep it to yourself. “The easiest way to lose your money is to tell people you have it. As you are building wealth keep your finances in a tight circle,” she says.
2. Earning/Investing
In order to truly build wealth, you have to escape the mentality of trading time for money. This is where investing comes in.
When you think of investing you probably think of middle age white men dressed in suits yelling at a big screen of numbers. Investing was once something preserved for the rich but it is now something that is accessible to almost everyone, regardless if you are a small business owner or a working parent.
Investing can seem like a complicated concept but in reality, it’s very simple. NerdWallet defines investing as putting your money into assets, such as stocks or bonds, with the expectation that your money will grow.
The key to investing that will help you build wealth is to start early. Even if you’re eating mac and cheese for dinner every night and have 3 roommates to save money, there are still ways for you to invest.
Nerdwallet suggests the following simple methods of investing for beginners.
A 401(k) or other employer retirement plan
Regardless of how you feel about your job, if they offer a retirement plan you should hop on it. Take advantage of this easy investment strategy especially if your company is willing to match whatever investing percentage you decide to do.
Try out Robo-advisors
If the thought of dealing with numbers makes you cringe, your best investment option is a Robo-advisor. They are electronic services that use computer algorithms to do all the investing for you. They require a small investment to start and similar to your succulent house plants, you only have to check on them every now and then.
Pro tip: Look into the down stock market
One area of investing that can be a gold mine is the down stock market. According to Foulkes “while the rest of us are freaking out and selling during a down market, the rich are buying our fear by investing in deeply discounted stocks, mutual, funds and ETFs.
3. Take care of yourself
When it comes to building wealth, self-care matters. But this doesn’t mean spending most of your money on spas and massages. It means that generating wealth isn’t all about money.
Foulkes suggests you take time off. “How can you be your best self if you’re burnt out?” she asks “Capitalist culture shuns us if we take all the time off that we need. Take days off and turn off your work email. Work will still be there when you get back. Wealthy people take time off to recharge and refresh so should you.”
Remember there’s no point in making 6 figures if that money can’t help you build a life you are happy with.
4. Become financially literate and build a team
Knowing about how money works within the different financial systems is what helps the rich get and stay rich.
There are three financial literacy basics you should know about: debt, taxes, and earning potential.
Debt
Debt is something that is easy to accumulate and can take a long time to pay off. Whether you’ve already acquired debt or you thinking about getting a credit card, make sure you understand important aspects such as interest rates and spending restrictions. In addition, the Balance Money suggests that you don’t use debt to pay off debt. There are many companies that offer you loans to pay off your debt, but they often require a downpayment or a high transfer fee. With these additional costs, you may be paying more than what you previously owed.
Instead, consolidate your debt with a company that can offer a lower interest rate with no additional fees. You can also talk with your credit card companies to negotiate a lower interest rate.
Taxes
Nobody likes taxes but they are a part of everyone’s lives, and it’s important to understand them.
Foulkes advises that you “make it a point to understand the basics. Lack of understanding will give more of your dollars to the Federal Government.”
She further explains that there are eight types of income streams and they are all taxed differently and it’s important to understand the differences. In addition, Foulkes suggests learning the difference between tax credits and tax deductions.”
Earning Potential
Many people simply look at the number on their paystubs and live their lives. But you want to build wealth so you are taking the time to understand how much money you bring and how much goes out. You’re also monitoring your salary and looking for different earning potential.
To help you manage taxes, earning potential, and debt, you can utilize free resources but it’s always best to work with or hire a professional.
Foulkes recommends that as your income and assets grow, it’s best to level up and hire a financial team to help you keep more of your money. “The wealthy do not take ad-hoc or social media financial advice and tax tips,” she points out. ” They hire professionals. What you see on the internet may not apply to your specific situation.”
To help you build wealth, Foulkes suggests hiring a Certified Financial Planner. For tax preparation, she suggests hiring a CPA or an Enrolled Agent.
Everyone deserves to be wealthy. Yet everyone doesn’t understand that building wealth takes time financial literacy, discipline, investing, and overall control and understanding of your finances. If you are able to follow a financial plan, you can live a life of wealth and financial freedom.
