Friday, October 19, 2018
7 Keys to Building Wealth That Anyone Can Follow
Being wealthy is such a subjective concept. Ask the average millionaire and they will probably call themselves middle class. On the flip side, many who are right above the poverty line have been duped into thinking they are doing alright, probably by their employer. I believe anyone can achieve wealth, which in my opinion is the ability to live without worry or fear of what tomorrow brings. How do we get there though? It might not be as complicated as you think. I have clients all over the spectrum, from just starting out to 20 years into retirement. Today I will show you my 7 Keys to Building Wealth that anyone can follow. Let’s get started.
1) There is no good debt
Truly believing this is essential to being wealthy. We have been sold, primarily by the people who make money off debt, that there is good and bad debt. While I admit that some debt is worse than others, all of it pretty much stinks. This narrative has become especially dangerous over the past 10 years where interest rates have been shockingly low. This has allowed people to enter into debt arrangements that they otherwise might not have been able to. Why I say there is no good debt is simple. The only way you accumulate wealth is by being an owner. Owning assets is wealth and you never really own something if you have debt. Having debt leaves you vulnerable. While you may be able to service that debt quite easily, that might not always be the case. We are all one accident or health problem away from our lives being altered forever. That makes debt especially risky as most people don’t realize their greatest asset is their health. At that point, your only option would be bankruptcy. The key is that people need to live and breathe debt freedom. If you have the mentality that there is no good debt, you will be wealthy. If you don’t, you are rolling the dice.
2) Understand your relationship with money
This part is going to sound very sappy, but hear me out. Many factors come into play to help us develop our thoughts on money. Our parents are a big one, having shaped us for several decades. How we lived as a child dictates much of our money mentality. Another is our susceptibility to influence. Do friends, peers or even the media affect our judgment with money? Part of what I do as a money coach is helping people understand what makes them tick in terms of their money. Fear of ending up like your parents should logically make you do the opposite of what they did. Constant shopping sprees and overindulging should make you adjust that behavior. You must know your weaknesses and turn them into strengths. Fear is an excellent motivator but only if it forces you to choose differently. Saying you aren’t good with money at age 30 is one thing. Saying it at age 60 is a whole other thing. Remember there are always choices. Sadly, as you get older, the choices become fewer and less desirable if you made the wrong ones when you were younger.
3) Pick the right partner
I am a big believer in divorce. Wait, what? Let me rephrase that. I believe in freedom, the freedom to do what you want. Think of all the mistakes you made in your life. It is logical to think that picking the wrong person could be one of them. Compatibility is huge. I believe that a relationship should flow like parallel lines, both heading in the same direction. Intersecting isn’t always what’s best. You have dreams and aspirations and your partner should be on board with that. Those dreams should include financial stability. If your partner is interfering with that then there is a big problem. There is a reason divorce financially ruins people. It is because they are not handled well, usually starting in the marriage. You and your partner must be on the same page financially. You can’t have a saver and a spender living together. You can’t have one person giving everything and the other giving nothing. While this might sound cold, a part of your relationship must be all business, the money side of it. You wouldn’t believe how many bitter old men I have met in my life blaming their one-bedroom existence on one or all their ex-wives. Chances are they had a large part in their current existence. With the right partner, you can achieve more than you ever imagined. With the wrong one, Puritan Beef Stew might be in your future.
4) Live below your means, always
We are naturally impatient beings. We want the things we want, and we want them right now. The problem is that we can’t always have what we want. I want a vacation home in Jamaica and I am sure I can find some sucker to lend me the money for it. The problem is that is not within my means. Why is it that we have families making 100-150K annually and they can barely afford to make their monthly mortgage payment? We have grown accustomed to cheap lending and getting what we want all at once. This makes us cash poor and debt-heavy. Your standard of living should grow slowly, very slowly. If you maintain this mantra, wealth is in the cards. Remember that wealth only comes with the acquisition of assets such as a paid-off home, large investment account and money in the bank. Living above your means takes money away from wealth building and helps build others wealth, the people you are buying the crap from and lenders. Make a habit of spending less than you make, far less, and you will indeed be wealthy.
5) Find a job with a retirement plan, or do it on your own
Working for a company with a retirement matching program can help you greatly in your quest for wealth. If you are job searching and that is the differentiator, you will want to choose the company with the retirement plan. A company with a matching program will literally double your retirement savings but even more importantly, it encourages saving and investing for the future. If you are one of the many people who doesn’t work for a company with a retirement match or you are self-employed, you are on your own. Being on your own isn’t a bad thing, all it means is there is no free money. Make sure you are taking the steps to be prepared for retirement, including savings 10-20% of your income in long-term growth investments. Investing for the future is instrumental to retiring comfortably, but also it allows you to take advantage of opportunities, prepare for health problems and even leave a legacy. Keep it in the back of your mind always.
6) Protect against disaster
Nothing will end your quest for wealth faster than injury, illness or death. While insurance always seems like a waste of money, it really isn’t. Here are my thoughts on the subject. Insurance is all about risk. What is the risk and what measures can we take to guard against it? Financial risk is real. Think of it as a warranty on your body. We laugh when we hear J-Lo insures her butt or Tina Turner insures her legs. Think about it though, those make them money. If you had a Goose that laid golden eggs and each golden egg it laid made you a thousand dollars, you would probably insure against that goose dying. What if the goose that lays the golden eggs is you, and your paycheck? You get up and go to work every day and when you come home you enjoy the fruits of your labor. A roof over your head, food on the table and a future for yourself and your family are all dependent on you making that paycheck. If that’s gone, everything’s gone. That’s why you take a portion of your monthly pay and dedicate it to insurance. I have literally never met anyone, ever, who is poor because they bought life insurance. I have met many, many, many people who are poor because a loved one died without having life insurance or not enough of it. Protect your life, protect your health, protect your wealth. Simple.
7) Live, eat, breathe wealth
Two and a half years ago I had a little bit of money sitting around and didn’t know what to do with it. I decided to take that money and invest it until I knew what I wanted to do with it. This past week I withdrew that money from my investment to purchase another investment that will help my career, an investment in myself. Over those 2.5 years, my investment grew about 20% and allowed me to take part in something that I wouldn’t have been able to do if I just spent the money or left it sitting around. The moral of the story is that you have to work hard at wealth and always be thinking about it. When you a decision to make, err on the side of wealth. Will this purchase help my life? Will this hurt my monthly cash flow? Will I be able to achieve my dreams of wealth if I make this choice? Sounds overly dramatic, but it isn’t. If you take on the mantra of making small, medium and especially large decisions that always have the vein of wealth in them, you will be wealthy. These decisions always include saving, investing, and thinking about the future. Remember there are no shortcuts to wealth so avoid get rich quick schemes and hot stock tips. More people go broke that way than don’t. Focus on the fundamentals and you will indeed be wealthy.
I have said it before and I will say it again, I think everyone has it in them to be wealthy. Create the right habits now and banish the wrong ones and you will be on your way. It’s not rocket science, it’s just common sense.
“Wealth is just consistency… I don’t want to be rich. I want to be wealthy.” – Quavo
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