Sat 19 Apr 2008
Hello again Wealth Builders!
Here we go with Personal Money Management for Wealth Builders - Part 5:
Get Your Money Working For You, Rather Than You Working For Your Money.
Successful wealth builders know what it takes to build wealth, and it’s not necessarily investment tips from Warren Buffett, a big inheritance or a six- or seven-figure salary. The truth is, there are many “average” people who build great wealth. Some run their own businesses or manage their investments full-time; many still work at full-time jobs. Regardless, they do what they do because they want to, not because they have to do it to survive. They have this freedom because they know how to get their money working for them.
Simply put, successful wealth builders work, save, and then invest their money so they never have to work hard again! Wealthy people see every dollar as a “seed” that can be planted to earn ten more, which can then be replanted to earn a hundred more, then a thousand more, and so on! Many multi-million and even multi-billion dollar fortunes began with just an initial vision and desire, a small investment (often just a few dollars), and steady work and perseverance.
In contrast to successful wealth builders, most people work hard and then spend all of their money as soon as they get it. Or, they lock it away in savings accounts which, while relatively secure, provide very low returns. Either way, the end result is that they wind up working hard until they retire… and then they often don’t have the net worth or retirement income to do what they want anyway!
Successful wealth builders have a different attitude towards money. They know that no matter how they earn it initially, the key to making their money grow is to make it work for them. In other words, instead of spending most or all of their money on consumer goods and activities that do not produce any returns, or low-interest savings and retirement plans that produce very low returns, successful wealth builders put their money into higher-return investments, businesses and other profitable avenues. So an important key to successful wealth building is to:
Be An Investor - Not A Spender Or Saver.
Our current society and culture emphasizes spending based on brash materialism and instant gratification. There are always thousands of new, slick, fashionable consumer products, services and fads being promoted through advertising, the media and popular culture: cell phones, televisions, stereos and other techno-toys; designer fashions and accessories; cars and trucks; fad food and drinks; you name it. Advertisers spend billions to convince us that we need these things, and then they make it easy for us to get them right now by offering credit and easy payment plans. People are often led to believe that having the “latest and greatest” is normal or even necessary for an acceptable lifestyle. As a result, they spend their money as soon as they get it - or even before they get it, in the form of credit.
The truth is, most of these things are wants, not needs. But because we’re convinced that we need them - to keep up with the Joneses, or because our favorite celebrities endorse them, or simply because they look fun or fashionable to have, or whatever - we sign on the dotted line anyway. The end result is that we get some new toys to play with, but we spend all of our money or add to our debt. As a result, we actually put ourselves farther away from true financial freedom… where we could buy anything we want without spending all our money or going into debt!
You Can Have Anything You Want - But You’ll Get It All Sooner If You’re Smart About It!
Let me clarify: there is absolutely nothing wrong with enjoying fine things and a luxurious and healthy lifestyle!
However, if you spend all your money on consumer goods, lifestyle items and other non-income producing things now, you actually cut yourself off from a better and more luxurious lifestyle down the road!
Successful wealth builders understand this. This is why you will find that millionaires and billionaires usually pay for every depreciable item they buy in full. They might use credit cards and accounts for convenience’s sake, but they don’t carry balances - they pay off everything in full every month. Now, this isn’t just because they can… you’ll find that successful wealth builders have done this since they first started building their fortunes.
You see, from the beginning they knew that by going without a few luxury items and gadgets, or by driving an older car, they would have more money to invest. They also knew that their investments would multiply… and that as a result, they would eventually be able to buy whatever they wanted.
When you invest, you can create the financial freedom to buy the things you want for cash, without affecting your financial well-being at all. Does successful investing take will-power and discipline? Yes. Does it take time? Yes, although often much less time than you think. But the rewards are well worth it.
Saving Is Better, But Not Best.
Saving your money is better than spending it all on consumer goods and other depreciating items. However, great wealth is rarely created by saving alone… at least not quickly. Yes, saving is a step up from spending on consumer goods: at least your money isn’t being frittered away on non-income-producing items. But money held in savings pays little or no interest; it’s not working for you nearly as hard as it could.
That’s not to say saving is bad. You should always devote a portion of your income to savings; building up a solid nest egg is always a good idea. However, to really build wealth it’s much more effective to put as much money as you can into higher-return avenues: investments.
Become An Investor!
To build the kind of wealth that gives you true independence and financial freedom, you need to become an investor. Putting your money into things that become more valuable over time, such as securities (stocks and bonds), real estate and successful businesses has, historically, been the best way to build wealth. Wise investing always produces good returns in the long run, and if you use the right short-term strategies your investments can grow very quickly too!
It’s extremely important to get educated: learn about the investment world. Familiarize yourself with a variety of different investment vehicles and financial instruments, such as real estate, mortgages, stocks, funds, bonds, currency exchange… anything that interests you. Then, choose one primary area to start with and become an expert at that type of investing. Learn as much as you can and apply it. Later, you can diversify into a broader portfolio.
Spend some money on products that will help you learn about investing, particularly your chosen area(s). In fact, educational materials are investments themselves: investments in you. The more knowledge you have and apply, the more success you will achieve. There are some amazing books, courses and other materials out there that will inspire and motivate you in your quest for personal wealth, and give you the tools to do it!
Get Started Now!
The most important thing is to get started right away! Research various investment avenues, choose one that appeals to you, and learn as much about it as you can. Read books; take courses; consult with those who employ it or are involved with it; learn all the ins and outs.
Next, start with a set amount of your money (principal). This can be a small amount; in fact it should be when you’re first starting out. Invest as much money as you feel comfortable with, but never, ever invest more than you can afford to lose! As you gain more experience and produce higher returns and more consistent results, you can invest greater amounts.
Continue to learn and invest, and your investments will produce greater and greater returns. You want to add those returns to your investment principal and re-invest them. Resist the temptation to spend all of your investment returns! Re-investing helps your fortune to grow more rapidly: as your wealth continues to increase, you can diversify into new investments and create multiple streams of investment income.
Freedom: The Ultimate Goal.
Regardless of where you invest your money, your long-term strategy should be to achieve adequate growth so that, ultimately, you can live on the income your fortune produces and never have to dip into the principal. That kind of financial freedom and security can be within your grasp if you adopt the strategies of those who have achieved wealth by way of wise money management and investment.
By shifting your thinking and behavior to that of a wealth builder, you’ll never again have to trust your fortune to fate. That’s a good thing, because research shows that most millionaires rarely, if ever, buy lottery tickets!
Again, if you focus on investing instead of spending, learn new things, use proven investment vehicles that work for you, employ strategy and discipline, and re-invest your returns consistently, you can achieve financial freedom very quickly - and that’s what wealth building is all about!
