In this article I thought I’d go back to basics and provide some very simple strategies to help accumulate wealth. None of these idea’s are new or things you haven’t heard before but like football, success is most often found in doing the basics well.
I hope that you find this article helpful and welcome any questions you may have.
1) thou shall not spend more than thou earns
– this is the simplest of all wealth creation rules. Know your fixed expenses and budget an amount to cover lifestyle expenses. If your costs are greater than your income then find ways to reduce them despite the short term hurt.
Or find a way to increase your income.
Your bank balance will thank you.
2) thou shall seek guidance and education before investing in anything.
– if you’ve never invested before, then spending some time learning characteristics of different investments will help you decide what investments are right for you.
Many fund managers and education centres can provide you with booklets or courses, and the internet is choc a bloc full of investment ideas. Time spent learning is a far greater investment than any single other asset.
3) thou shall not be convinced to purchase items not needed nor wanted.
– just how many TV’s cars, i-pods, wii’s do you really need?
We tell children they can’t have everything they see due to the lack of a money tree in the back yard, so why don’t we practise the same rules for ourselves.
If you ‘simply can’t resist’ a shoe sale sign or new Apple product launch, then try leaving your credit card at home and out of your wallet where it causes more damage to wealth than any single other object or event.
4) thou shall learn good money habits and abide by them.
– if you already have some good habits in place why not try expanding them to other areas.
For example, if you have direct debits set up on your bank accounts to pay bills and loan repayments, why not set one up for a savings account that is hard for you to access.
For example, having a direct debit setup to take $100 a week from your working account and transferring it to an ING savings account will help you accumulate $5,000 a year to spend over Christmas, instead of chalking it all up on your credit card.
5) thou shall plan major purchases and budget for them.
– we all know people who have gone for a drive on a Saturday to look at a display home and end up buying a new house they couldn’t really justify but got it anyway because they got “such a great deal” or were cajoled into a deal.
If you really do need to buy a new house, or car or other major purchase then sit down and work out how much room you have in your cashflow and go to your lender first and discuss financing options.
Organising finance first will reduce stress and help establish your scope before being pressured into signing contracts.
6) thou shall not borrow money for depreciating assets.
-seriously! Gerry Harvey is not worth $1.5 Billion with a big B because he’s a philanthropist who is doing YOU a favour by offering to sell you his goods without you having to pay for 2 years or longer.
If you don’t have the cash, you don’t NEED it. Want it maybe, but not need. Set up a savings plan to purchase those new must-haves.
7) thou shall set financial targets and pursue them
– it is common for people to plan their Christmas holidays and yet when it comes to what level of wealth a family wants for themselves, most couples are rarely on the same page.
This is an excercise that can result in heated discussions and frustration, but setting financial goals as a family will bring lifelong desires to the surface that may have slipped by unknown.
Even if you achieve just one more of the things on your wishlist, hasn’t it been a worthwhile experience?
8) thou shall not kid thyself.
– this is one of the easiest traps to fall into and potentially very damaging as you could be setting yourself up for failure and it is far better to achieve smaller goals and build your life positively than fail at something massive and have it hang over you, giving you less incentive to try something new.
If you’re on an average income, have a non working spouse , 3 kids under 10, and a big fat mortgage then you will find it very difficult to save $1,000 a month into an investment plan.
You’ll probably give up after the first month when the rates notice arrives and never restart it, far better to put a small amount away on a consistent basis and increase it as your capacity increases.
9) thou shall teach good money habits to thine offspring
– why not start including your children in money discussions at home.
Like many other life lessons, the earlier we teach them, the better.
If money discussions turn into arguments then you should probably avoid this but if the kids hear that you have to pull your belt in this week as the car rego is due then they might be less likely to pester you for new non-essentials.
The reverse is also true. If you’ve achieved a savings goal or paid off a debt, why not celebrate as a family by going to dinner or some other reward aligned with your family values.
This will help teach them the principle of delayed gratification.
I, myself have even had my 3 month old girls sitting on my lap while purchasing shares. They may not understand the concepts at all but they are learning the sound of daddys voice while he’s sharing his ideas and let’s face it, certainly more interesting for the reader than re-runs of children’s stories.
10) thou shall enjoy the rewards of a wealthy life
– OK, so you developed a simple plan for saving money and invested wisely.
You’ve learned how to set financial goals that are within your reach and you’ve taught lessons about money to your children while living frugally.
Enjoying the rewards of delayed gratification is as important as achieving the result.
Becoming wealthy is something you should be proud of not ashamed, unfortunately we live in a society where we try to tear down those that have built success for themselves.
Building a healthy attitude towards money will help prepare you for the day you achieve your long awaited desire whether it be early repayment of your mortgage or early retirement so you can spend the rest of your days on the beaches of the world.
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