I get asked this question, or some variation of it almost every day: Marcos, how do I grow my wealth?
Most people are looking for a quick fix. A few words of advice that will just automatically click and POOF! instant wealth. But that’s not what we do here. The problem with giving a quick solution is that people think it means that it is easy. They don’t really want to put in the work, they just want the results.
Very few people actually get proactive with their finances and are willing to take the initiative and responsibility. I have put together a list of things that require proactivity but produce results. Most people don’t do these things, but if you want to gain a hold of your own wealth, get better with your money, improve your financial situation, and even enjoying the process, you need to start doing these 5 things!
- Track how much you’re spending. We will start with something very simple and basic. It is a fundamental step toward financial success. Tracking your cash flow is very important, and without truly mastering your spending, you will not be able to increase your net worth. You will need to look at your earnings and create a budget. Do you spend more than you make? What changes do you need to make to not spend more than you make? If you simply break even at the end of the month then you will never have enough cash flow to save and invest. Which brings us to our next point...
- Put most of your money aside (or invest it!) I know it doesn’t always seem possible, but this should be your goal. For those who only want a small cushion, you can invest about 10% of your income towards your retirement. But many people (like me and you), want more than that. What we want is financial freedom. We want to be released from the feeling that we need to earn a big paycheck to feel wealthy; we want to use our money in a wise way. We want to use our time better and more effectively. When your goals for your life are bigger, your savings and investments need to match it.
- Assets Vs Stuff. Sure, owning a flashy car and a giant house is a great goal, and it normally does show some measurement of wealth and at the very least, affluence. Thomas J. Stanley in his book Stop Acting Rich calls those people “glitteringly rich”. They may have high incomes (or else how else could they afford this expensive ‘stuff’), but they spend their money instead of investing or saving it. All their wealth ends up being tied up in possessions. What would happen if they lost their paycheck? Would they know how to recover? If your goal is to grow wealth, you have to focus on doing just that, growing your wealth -- not on spending it just to make yourself “look wealthy”.
- Take the hits. One of the biggest issues I’ve found with people who come to me for advice is they want the results, but they aren’t willing to take a risk with their money. They won’t invest in a fluctuating market, and the fear of even losing a single dollar keeps them from even entering the race. Even just sitting on your savings and doing nothing with it can present certain risks. The more time you spend outside the market, the more you risk not being able to save enough cash to go towards your goals.
- Do it right, the first time. Let’s be honest, most people don’t make their millions by winning big at the lottery or through one giant investment-gone-right. Those who succeed do so because they took time and care to get things done right. Even the small things. And they did it over and over again. People who achieve wealth know how to absolutely nail the fundamentals and they practice good habits every day. Some of those little things include:
- Prioritizing goals and values so they know exactly where to put their money (and where not to);
- Tracking their finances and spending habits;
- Making sure they have systems and processes in place to ensure that they don’t fall into bad habits, ie. automating their savings and investments;
- Acknowledging when they don’t know something and doing the research to find the right answer for your needs;
- Asking for help and support, which typically comes in the form of coaching, or an accountability partner.
If you want to reach financial freedom you have to stop making up excuses. For things we don’t want to do, we will always find a reason not to. If you’re willing to commit to the things that will lead you to wealth and financial success then you will reach all of your goals.