It’s that time of year again – time to think about what went right this past year and what you would like to try again next year. Some of us will likely be thinking about improving our health by exercising more or eating better. Others will likely be thinking about ways to improve their financial position in the year to come. Maybe that is paying down debt, trying to save more, or simply just implementing a budget for the new year!
I often think about things in a process format, it makes things easier for me to comprehend so I thought I would share with you a process for accumulating wealth.
Step 1: Start Right Now!
All of my students should be able to tell you about the first step in the process – they all know that the driving factor in accumulating wealth is time!
I would love to break down the compound interest formula and show you mathematically why time is the key factor and if you come to one of my classes you will likely see that happen! But for now just take my word for it; the sooner you start, the more you can accumulate!
Step 2: Have a Goal!
I like having goals, they are a great way to track your progress! I suggest using a percentage savings goal. A great idea is to save 16.66% of your gross income each year for wealth building. I know that is a big number so start small, with something affordable and increase your saving percentage each year by 1-2%.
Step 3: Make it Automatic
I often hear stories about people setting up a contribution to their retirement account and then going in and changing it all the time according to their income needs. That’s a bad idea. Most of us do not have enough discipline to be able to set aside money on our own… we have to build fake discipline. The best way I have found to do that is through automatic deposits. I literally treat my saving like a bill that comes out automatically each month. Once I pay it, I forget about it. And just like a bill I cannot change how much I owe (myself), I am required to pay the obligation – because if I don’t, no one else is going to do it. Just set it up and then do not touch it!
Step 4: Find a Jet Engine
Most of wealth building is accomplished through great habits but there is also an element of risk and good fortune. A key piece of investing is the idea of risk versus reward. In order to be paid you have to take risks, the more you want to earn the more risk you have to take! An essential part of reaching your wealth goals includes the need for a high octane investment that will propel your portfolio to success. This could be a personal business venture, an investment in some sort of security, or even an investment in yourself – whatever it is you have to capitalize on those opportunities!
Step 5: Leave it alone
Find a strategy, implement the strategy, and let it run its course.
Have you ever tried to make a great omelet? As you practice the art of omelet creation, you will find that a key mistake people make is that after they crack the egg they don’t let it sit long enough before adding their filling (also people often overfill the omelet which is a mistake as well). You have to let the egg set up and run it’s course!
Too often people start meddling with their strategy too quickly! Either they aren’t performing how they hopped or they are out performing and want to try to do more.
Give it some time! Rome wasn’t built in a day! Things that come quickly are quickly lost!
Step 6: Keep Doing it
No matter what, press on. The only person responsible for your financial future is you. All you can rely on is that there are no excuses, just results.