Got What It Takes to be Rich?03.21.11
So you want money, lots and lots of money. Well, if you want dollars high to the sky, we suggest you know the financial truths and fiscal tricks to building your personal wealth. Building wealth requires you to manage your money and take control of your monetary situation. Here are ten steps to help you do just that.
Follow your money.
Trying to maintain a particular lifestyle consumes most of your financial resources. Analyze the areas in which you spend the most of your money. For instance spending money on food is essential to live, but, do you have untouched food in your kitchen cabinets and refrigerator? Looking your best is important for you to feel good because when you look and feel good you do well. But do you have to spend $120 on an outfit when you could mix and match the clothes have in your closet?
Eliminate credit card debt.
There is absolutely no way you can build wealth by slaving your money to debt. Interest accruing on credit card debt binds you to a longer payoff period, and you will pay more for your original purchases.
Establish an emergency fund.
Cash is still king. If there’s an emergency the last thing you want to do is to tap into your investments. Work up to saving at least eight months of your monthly expenses. Building your emergency fund does take time, but they key is to regularly set aside a certain amount of money until the goal is obtained.
Invest in the stock market.
Volatility is necessary to accumulate your assets. Despite the market’s downturn during the financial crisis, weathering the ups and downs of the market requires time. It’s the volatility which allows you take advantage of the market when it’s up and when it’s down.
Cost can decrease your returns and increase your loss. The irony with the old adage “you get what you pay for” is that the less you pay, the more you earn. Begin building your wealth by investing in an index fund that owns the entire stock market as the core of your portfolio.
Always reinvest your dividends.
Accelerate accumulating your wealth by reinvesting the company’s earnings (dividends). For example, DRIPS (dividend reinvestment plans) are great vehicles to compound your investments because they are set up to reinvest the dividends.
Dollar Cost Averaging.
Consistently contributing to your investments will allow you to take advantage of the market’s volatility. Dollar cost averaging does away with timing the market.
Life insurance policies may enhance your wealth building strategy.
Typically, with Variable Universal Life and Equity Index Universal Life insurance you can fund these creatures and in return they will provide to you tax-free money. They are considered the bona fide financial Swiss army knife. It’s imperative you explore your options with a financial advisor who has acquired the knowledge to understand these policies.
Want to know how to minimize your risk? Diversify your money. Diversification reduces overexposure in the market by investing in a variety of assets.
Automate your wealth.
Automate your contributions to your emergency fund and investments; and, even paying your bills. This will help you manage and keep your financial goals on track.
Written by: Ornella Grosz
Ornella Grosz is the author of Moneylicious: A Financial Clue for Generation Y