In these days of instant gratification, it is
easy to think that the things we want are actually needs. In fact, most of the
things most people think they need would have been considered to be luxury
items just a few short years ago.
Track and Cut
The first thing you must do is track your spending. In detail, keep track of every single penny you spend even if you think the amount is insignificant. I keep a journal to track my expenses.
Do this for one month. You will discover that there are many items on your list of purchases that were frivolous or unnecessary. When you cut these items, you instantly give yourself a raise. Here are some things I cut from my life when I needed to give myself a raise:
When I cut these few items, I gave myself a 300 dollar per month raise… instantly!
Live Below your Means
In theory, your rent or mortgage should be no more than 1/3 of your monthly income. Remember, your freedom depends on decisions you make today. If it is possible, find a place to live that only costs 1/4 of your monthly income. If you think you deserve to live in a nicer place remember, you are correct and you will. Right now, you are living wisely and saving for your future.
Purchase a certified used car as opposed to a new car. The moment you purchase a new car the value depreciates.
Purchase clothing from stores which offer designer clothing at discount prices. You will get excellent quality and more bang for your buck.
Make sure that you purchase coats, shoes, bathing suits, and haircuts that are high quality. You must never skimp on these items. These items of clothing are worn on multiple occasions and should last for years to come. Your hair is worn all day, every day and should always look it’s best.
To Build Wealth, You Must Invest!
To build your wealth you must invest your money. The first and best investment you can make initially is on educational tools which will guide you to know which investments are right for you. Money Magazine and The Wall Street Journal are 2 publications which will give you enough information to get started.
When I first started investing and to this day I invest in mutual funds. They are an easy way to invest in a group of stocks that suit your financial goals, interests, and even ethics.
I have used some mutual funds for short term investing to save money for expenses like purchasing a car with cash or a down payment on a home.
Paying cash for a car is smart because it’s a depreciating asset. Paying interest on something that loses value causes you to lose even more money that you could be using right now.
Home ownership has historically been an appreciating asset. The fact is, you have to pay to live somewhere either rent or a mortgage. Why not pay for something you own rather than giving it to someone else to make their mortgage payment?
To this day, I use mutual funds for long-term investing.
When you decide what funds or stocks you are going to invest in, a good rule of thumb is to invest 10 percent of your income to start if possible.
Once you start implementing these 3 steps you will be on your way to building wealth. You will become more mindful about where you are spending your money and experience tangible rewards. I gave you a few suggestions and ideas for each way to build wealth but I am sure you will come up with more once you get going. Don’t delay, start today!
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