You’d be surprised at how simple it is to build wealth. You don’t need special connections, luck or anything of that sort.
You also don’t have to waste money on expensive financial seminars or “buy” the latest tricks and strategies.
John Bogle said that there’s no secret—and that is the secret.
Anyone can access the truth and knowledge on how to build wealth. As a matter of fact, it can be summarized in only two sentences:
- Earn more money that you spend then invest the difference.
- Adopt small daily habits which contribute to your wealth accumulation goal.
This may be disappointing. Many people don’t want to hear this, they want a new and clever secret.
While many marketers will promise you a special ingredient, this is the tried and tested strategy. Ask any wealthy person you know. Even Benjamin Franklin taught this truth hundreds of years ago.
This wisdom is timeless and will work for you if you commit. So, take a deeper look at each of these sentences.
Earn More Than You Spend. Invest the Difference
The first sentence is all about having a positive cash flow. Either spend less or find a way to make more money.
Spending less may mean adopting a frugal life.
You can start a business, ask for a raise or change your job for more income.
Make sure you have something to save and invest so your wealth can grow.
Frugality requires you to be self-disciplined. Depending on how much you earn and what you want to save, it may mean making a lot of sacrifices. This is what makes it difficult. Everyday you will have to choose between your financial freedom goals and lifestyle desires.
People who like simplicity may enjoy it, though.
Extreme frugalists have been known to save even 70% of their income just so they can become financial independent in 10 years or less. But this is not something that everyone can do.
Raising your income seems like the easy alternative. You can earn as much as you want. You are your only limit.
An even better alternative is to do both. Minimize your spending and increase your income.
In investing, you can either choose:
- Paper assets, such as a low-cost index fund
- Real estate
Small Habits to Achieve a Big Goal
The strategy outlined above is simple and people have proven that it works. All you have to do is act. This requires efforts and consistency.
Small actions done consistently over time lead to wealth accumulation.
Procrastination is your worst enemy. There will always be something else that requires your attention and money.
Start today. Identify a habit that will serve your goals and stick to it. If you have no idea where to start, here are some examples.
- Join a program for automatic saving.
- If your company offers a 401(k), opt in.
- Prepay on your mortgage (even a small amount counts).
- Eliminate unnecessary expenses.
- Sell any unused assets.
- Learn to repair instead of replacing when not necessary.
- Find a way to get a raise.
- Learn about real estate investment or asset allocation.