A prevailing belief held by many Americans is that there is some great secret to becoming wealthy. If you could just discover that secret, or find the ?trick? to it, riches could be yours. Few people realize, though, that the simple ?basics? are all you need to build wealth. That said, the reason so many people fail is that simple does not mean easy.
Simple Actions that Lead to Wealth
The ?secret? to wealth isn?t much of a secret at all. Indeed, a variety of simple concepts and equally simple actions can be applied in order to help you achieve prosperity:
- Spend less than you earn. The #1 rule of personal finance is striking in its simplicity. If you want to amass riches, you can?t spend all of your money. You must live within your means, taking care that you never live up to your income.
- Reduce your debt. Pay down your debt, and you free up resources that can be used to improve your net worth. Borrow as little as possible, and repay your loans as quickly as you can. Reduce the amount of interest you pay to others, and instead use that money to your advantage.
- Grow your income. If you want more money, you need to earn more money. Look for ways to grow your income, including both maximizing the lifetime earnings of your career as well as non-career ways to make more money like side hustles, part-time jobs, and passive income sources.
- Save for the future. Your rainy day fund can protect you against financial setbacks. Your tax-advantaged retirement investment account can provide you with a sizable nest egg. Take advantage of the ability to earn compound interest, and your wealth will grow.
- Invest in yourself. Wealth also depends on your own human capital. Invest in yourself by gaining an education, and/or developing a skill. You don?t have to earn a degree; you do need a marketable skill, or a knowledge base that helps you better earn and manage money.
- Play good defense. Be sure to avoid the worst money mistakes anyone could make. They can derail your financial gains and even completely ruin all of the hard work you put in to grow your net worth.?
When reading the above actions, it?s easy to dismiss them. ?If it were so easy, everyone would be wealthy.? And that?s the rub. The steps that lead to wealth are simple concepts that anyone can grasp. Actually putting them into action over the span of a lifetime is far from easy.
Wealth Isn?t Easy: Discipline, Patience, and Persistence
Building wealth isn?t easy because it also requires the specific traits of discipline, patience, and persistence. That?s the hard part ? and where the work is done.
Discipline requires that you show a measure of self-control as you spend. Rather than buying everything you want, you need to prioritize your spending, and purchase only what is most important to you. Discipline is also required when paying down debt and saving money. Instead of using your resources for all fun things all the time, you need to exercise self-denial and discipline to get rid of your debt and build your savings.
Even earning money requires discipline. Growing your income means that sometimes you have to get up early and stay up late. Occasionally, you have to complete tasks you find unpleasant. Even knowledge and skills are acquired only after you exercise the discipline to study and to practice.
Patience is a rare trait in today?s world. We are bombarded with messages of instant gratification and entitlement. You deserve that expensive car now. You can put your vacation on a credit card ? no need to wait until you save up the money. A 60-inch television can come home with you immediately if you qualify for in-store financing. The inability to wait to save up the money for the things we want leads to debt and financial insecurity.
Another difficulty is that few have the patience to wait for results. Your business ventures won?t yield results overnight. A good emergency fund takes months, or even years, to build. Dollar-cost averaging in your investment portfolio requires the patience of decades.
Persistence consists mainly of the ability to keep with your wealth-building efforts. It?s easy to give up when you don?t see instant results, or when you see your neighbors enjoying their over-leveraged lifestyles. However, in the long run, those neighbors are likely to have very little wealth, since most of the toys they enjoy now have been bought with debt. It?s hard to see that when everyone around you is having fun while you follow a more practical course.
Bottom Line
Follow the simple concepts of building wealth with discipline, patience, persistence, and you will eventually achieve financial freedom. Even though the concepts behind wealth are simple, it takes hard work to put them into practice.
Source: http://www.freemoneyfinance.com/2012/03/becoming-wealthy-may-be-simple-but-its-not-easy.html
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