If desire alone were enough to generate wealth, we would be a very wealthy society.
Dreams of hitting the lottery or becoming the next greatest athlete, performer, etc. abound.
However, it is a very unrealistic approach to obtaining wealth. Instead, we need to focus our efforts on building wealth, rather than stumbling upon it.
So how do we go out and get wealth?
If we are going to be realistic, we have to understand that it is not an easy process (or everyone would be wealthy),and we actually have to WORK at it.
There are 3 basic principals to building wealth:
1. Live within your means.
This seems to be a foreign idea in our culture, but your income is your greatest wealth building tool. The more of it you can keep every month, the more wealth you can build. So don’t just look at a payment plan and say “I can afford this”. In fact, you should avoid payments and credit cards all together. If you want to buy something, save the money and then go buy it.
Don’t get sucked into the lie that payments are just a way of life. 70% of Americans live pay check to pay check. That is why we can’t “get ahead”. It is not the lack of income, it is the lack of proper spending habits.
If your paycheck is designated to someone else before you even receive it, you are heading in the wrong direction. The idea is to pay yourself first.
2. Save money
You will not have wealth, if you are not disciplined enough to save money. What should you save money for you ask?
The first goal of savings is an emergency fund. Most financial experts agree that you should have 3-6 months of living expenses available. This will eliminate the tendency of life’s unexpected hiccups to cause a financial crisis and plunge you into debt.
Let’s be clear, this is not the “I need a new couch, I forgot Christmas is in December this year, or The pizza dude is here” fund. This is the “transmission needs to be replaced, I broke my leg and need to go to the ER or I lost my job fund.”
You can also save money for new clothes, a new car, new furniture, Christmas gifts, etc.
The important thing to remember when saving, is to plan for the future. Don’t wait for life to happen to you, forcing you to buy on credit because you weren’t paying attention.
3. Retirement Investing
If you can live a life without payments, and have an emergency fund in place, you will have a large portion of your income available to invest for retirement.
Nothing makes me more sad, than to see someone who has worked their entire life only to get to retirement and have nothing to show for it. Instead of living out their dreams of traveling the world and visiting their grand kids, they are stuck at home trying to make their Social (in)Security stretch until the next payment.
If you can invest 15% of your income for retirement, you should be able to retire with dignity.
Albert Einstein considered compound interest to be the 8th wonder of the world, so let’s take a look at how the math plays out.
The average household income in America is $50,000 per year. If you start investing 15% of your income at age 30, at age 65 you could retire with close to $4 million!
Here is the breakdown – 15% of $50k = $7,500 invested per year. As you continue to contribute and the interest continues to grow (the S&P 500 has gained an average of 11.85% per year), by the time you reach age 65, you can retire and do whatever it is that you always dreamed of doing.
Remember, in addition to having $4 million, you still have no payments so your expenses remain low as well.
So don’t just daydream about having money. Be disciplined, set goals and put together a plan.
If you get stumped on any of these steps and need some guidance, find someone who can help you achieve your goals. Don’t let the unknown stop you.
Tim Parady is a Financial Coach trained by Dave Ramsey’s team and an Insurance Agent at Dave Ramsey endorsed Alkali Insurance.
My name is Tim Parady and I am 36 years old. I was born in Connecticut, raised in Virginia, had a brief layover in Kansas which led me to Texas where I met my wife and best friend. We just celebrated 145years of marriage.
I have the best job in the world, which is to improve peoples lives. I teach people how to win in all areas of there money, which affects all areas of their lives.
78% of Americans live paycheck to paycheck, with no money in the bank and little knowledge of how to invest for their retirement. You can have a different future. You can win with money and I can show you how.
I am an independent Dave Ramsey Financial Coach,and Insurance Agent at Alkali Insurance and I am here to serve you. My goal is to provide knowledge and tools to change your life. To schedule an appointment to address your financial needs and goals, email me at firstname.lastname@example.org