Essential Financial Principles for Building Wealth
To build wealth successfully, you must be willing to plan, learn, and implement financially. This is as simple as it reads yet each of these three conditions presents varying levels of discomfort to the majority of the population, which is why the poor overwhelmingly outnumber the wealthy.
Financial planning, learning, and implementation each have an important set of rules that, when followed closely, make it possible to develop reliable strategies for perpetual financial growth. Individuals who are determined to work on their personal limitations, be those lack of knowledge, goals, means, or overall confidence in their abilities to overcome poverty, typically see results within five years of embarking on their wealth-building journey, provided that they stick to the rules without letting the usual distractions pull them away from their commitment to prosperity and financial independence.
Planning
To attain your goals and even accomplish beyond them, you need a highly specific wealth-building plan. Abstract, vague statements about wishing to have a lot of money will bring you close to nowhere. In order to attune itself and craft the best strategies for financial growth, your mind needs almost photographic clarity on your goals, including:
Why do you wish to be wealthy?
What do you want to do with the money?
How much money do you need in order to bring the wishes outlined in your answer to the second question to completion?
How do you plan to acquire the money?
What skills do you plan to learn in order to obtain the financial means you desire?
How much time will you allot to this endeavor daily, weekly, monthly, and for how long?
Commonly Perceived Obstacles to Planning:
I don’t know what will happen at work tomorrow, so it’s hard for me to make a specific plan at this time.
I don’t know what my spouse (or child, parents, friends, colleagues) will say when they hear about my goal. They probably won’t agree to it.
I can’t plan for a whole month ahead!
I have so much to do right now, but next year I should be better able to find the time and plan for financial growth.
These are examples of dead-end thinking. It is a common way of avoiding personal responsibility.
Learning
Once you create your plan, you will need to perform due diligence by doing your own research on the following:
Financial terminology, also known as financial jargon, which tends to intimidate certain people more than staying poor does.
Asset classes: paper assets, commodities, real estate, and business. Find out which ones best support your financial plan and get to work!
Financial instruments associated with each asset class. Yes, there are many. In fact, the sky is the limit!
Risks involved with each type of investment and proper risk management.
Understanding your personal risk tolerance level.
Commonly Perceived Obstacles to Learning:
I don’t have the time right now to sit down and learn all this, or the money to buy an online course.
My family is very demanding of my time and the salary goes to food, clothes, movies, restaurants, and sports games. Again, no time or money at present!
I can’t just sit in one place and study every day or multiple hours a week! I am not a student anymore, not to mention I didn’t really study that hard in school or in college, either!
It all just seems so confusing and complicated! I don’t think I have the right brain for this type of stuff. And it’s so risky: I can lose all my money! This is why most people seek financial experts to help them grow their money!
By all means, keep blaming your family, seek the “experts,” and pay the countless compounding fees attached to their services regardless of whether they actually make your portfolio grow or lose money on it. If you have the money to pay those fees, I can assure you that you most definitely have the means to expand your financial literacy!
Implementation: Putting It All Together!
Once you’re on the wealth-building path, there are some crucial principles to consistent success:
You must stay committed to your plan by setting aside the exact amount of money you promised yourself to set aside every month, for investments. Exceeding the monthly goal is excellent, but do your absolute best not to go in the opposite direction!
You must stay committed to your financial learning process by allotting the exact mount of time you promised yourself you would spend on learning, every week!
You must remain disciplined by not indulging desires for impulse shopping, and this applies to purchases of assets and liabilities alike. Teach yourself good self-restraint! Resist your impulse to purchase clothes, accessories, or so-called discounts such as “Get 5 for the price of 4,” when all you need is one! Every purchase must be first analyzed and planned.
Only keep one personal credit card. Each next credit card better belong to a business account! Take advantage of any cash-back your bank or credit union offers on the cards by zeroing your balances every two weeks or once a month, at the very least. Don’t be like the average majority out there drowning in high-interest credit card debt, please! If you are paying interest on credit cards on a consistent basis, it means you’re consistently purchasing things you cannot really afford and, to make matters worse, you’re acquiring these things at an inflated rate because of the interest you’re paying to the bank that issued the credit card! You are now their asset! Don’t do it!
Once you acquire a tangible asset such as a rental real estate property, you must get into the habit of handling your money in a way that’s less likely to bring unpleasant surprises. One such way is to budget liberally for expenses and make conservative estimates on potential profits. Please, understand: never the other way around! If it so happens that your expenses turn out lower than expected, you then add the difference to your profit column. If not, you won’t be disappointed because you came prepared to begin with!
While you’re a newbie investor, say, the first five years at least, don’t use your investment profits to buy bullshit luxuries that decrease in value the moment you drive them off the dealership’s or retail store’s parking lot! Reinvest these profits instead! That’s how you grow, not by displaying social status to people who don’t care about you or about your status anyway!
Prioritize problems by fixing the investments first, and your house last! In other words, always strive to repair and remodel your investment properties before you do the same with your personal property. Assets take priority, because the residents at your rental properties are business clients. Therefore, you take care of them first!
You must budget so well that you can easily afford to keep your prices competitive! Competitive pricing is not some abstract idea. It has everything to do with the financial knowledge and discipline of the business or asset owner! It also has a lot to do with earning the respect of your customers during difficult times that prohibit your competitors from offering decent prices.
The ability to do what I described in the eighth principle above comes with some sacrifice at the beginning and with experience that adds up along the way. I am not saying it’s easy but I do maintain that it is simple. It’s uncomplicated if you persevere, because the more experience you acquire, the fewer times there will be when you feel you’re making a sacrifice rather than building a solid asset. Bottom line: do not give up on your asset when things get a bit tough. Learn instead! Your perseverance pays off with the experience, cash, and resilience you didn’t have before!
Most importantly: start today! If you lack knowledge about tangible assets, start learning today! If you currently have no money to set aside for investing, start planning today on how to arrange things so you can set the money aside, earn extra income by making yourself more marketable, or better yet, both. If you have the money but like spending it on things you are well aware you shouldn’t be spending it on, start practicing self-control today by setting aside the amount of cash you need in order to meet your goal by the deadline specified in your financial plan. Start today and keep at it every day! It really is simple!