Simple Rules To Building Wealth
In life there are rules for almost everything. Our congress passes laws constantly to address certain needs in the nation, as do our state and local leaders. Businesses have rules, and there are rules to running business ethically and legally. Families have rules on how members ought to behave and what is expected of each. And schools, civic associations, national parks, cruise ships, and professional sports and little leagues have rules, all with a purpose of keeping things fair and equitable, safe, and proper.
So, it is no surprise that there are rules to investing and building wealth. Even wealth managers have stringent rules they must abide by according to the Securities and Exchange Commission and the Financial Industry Regulatory Association, which is the largest independent securities regulator in the U.S.
Individual investors have rules they invest by that are particular to them. Often these rules are decided by the size of their portfolio, a disposition to certain investment markets, or a philosophy.
But for many who are novices in investing, or who do not have time to become market experts on every and all opportunities that exist in our now global realm of investment, here are seven rules to help guide you in making the best decisions for you and your money in hopes of building wealth.
7 Rules to Building Wealth
As mentioned above, there are rules for just about everything in life. The purpose is, in part, to keep order and peace. Most investors want these same things where it regards their money, its performance, and its long-term growth and sustainability. The following are in no particular order.
1) Debt-Free Living – Ok, so I said these were in no particular order, but it does make sense to begin with the most fundamental obstacle to building wealth and that is debt. Debt happens for many reasons. Sometimes debt comes in the form of school loans, poor buying decisions, purchasing a home – we have seen in the last few years many go “under water” as a result of buying a home so they are not always safe investments – expected- or unexpected medical bills, and more. But, as long as you are paying interest on debt and keeping it afloat, then it is very difficult to build wealth. A wealth manager will help you create a strategy for becoming debt-free by first identifying your overall financial outlook and its main challenges. Then they will help you set a course for becoming debt-free. Think of all the wasted money spent on interest that could be put towards building wealth and healthy financial portfolio. Showing discipline here now will save you money and help you accomplish your goals while providing you peace of mind and the freedom to make better decisions down the road.
2) Goals – The old saying of aiming for nothing will make certain you hit it is true in life and investing. This is a place where many dream big but have little understanding of how to get there. A wealth management team can help you understand what is important to you now and in your future and help devise a plan to help you get there. Setting a financial goal will help you make the right financial decisions on how you spend your money, and how you save it. If you want to have $1,000,000 by the time you are 40, how will you accomplish that? Also, as your life changes by addition of family members, a move, a new job, or other considerations, your goals may be affected. With these changes, it is recommended that you sit down with your financial adviser to adjust your plan accordingly, and then make the necessary changes in your handling of money to keep you focused and on target.
3) Create Other Sources of Income – This may require working extra hours at your job, having your spouse work, taking a second, part-time job, or starting a business. This additional income should first go towards paying down debt, and then be applied to your portfolio to help you achieve your goals on time or faster.
4) Buy Insurance – Insurance as a wealth builder? Perhaps, but more importantly, insurance is a wealth protector. If you are the primary source of income in the home you should at the minimum have life insurance at three times your yearly wages if you have a family. Additionally, you should have critical care health insurance that pays for expenses while sick, and you should also consider disability insurance in case you are injured and are unable to work. There are other insurances to consider, but these will help stem any catastrophic cash flow issues and allow your family to continue moving forward if you are otherwise unable to. You may also want to consider child insurance, insurance for your spouse, and definitely business insurance if you own one.
5) Invest in Your Career – This may mean working longer hours to earn that promotion and pay raise, or just do your job with excellence so you can max out the financial opportunities existing at your company. You may also want to look outside your company for a new position when you are coming near to maxing out existing opportunities as it is common for people to get larger raises when moving to a new company than when staying with the old one. Also, spend time getting an advanced degree or certificates that will help you earn pay raises. Also, as mentioned above, take your expertise or passion and consider starting a company either entirely or in part to earn extra income. Take these additional earnings and invest them while retaining your current budget. Do not live up to the level of your income, but be disciplined and invest this money to build wealth and meet your financial goals.
6) Change the Way You Think About Money – Many people are consumed by money, and I don’t mean to imply that they are greedy, but it is such an essential part of everything we do it is always at the forefront of everything we do. That is fine and understandable but recognize that money does not solve every problem nor does it bring lasting joy. Make peace with money by submitting it to the most important things in life, such as family relationships, living with a purpose, and the needs of others. Living your life solely to pursue money will rob you of health and real joy. Let your money work for you and not you for it. Learn to say “no” to certain expenditures and yes to meeting your financial goals.
7) Hire a Wealth Management Company – In the past there were only so many investment vehicles in which to choose from. Today that has changed as opportunities for investing are not only global but exist in a multitude of options. Even if you had the time and capacity to learn the markets you will not want all of your money in stocks. A wealth management company will sit down with you and learn about you and your goals and help devise a strategic plan to help you achieve them. You do your part by being wise with your investing dollars, and they will take them and help them grow so you can meet your financial targets in the time frame you wish to. Not all wealth management companies are the same, so do your research in seeking out companies who have clean records, nothing pending with the SEC or the states attorney general, and who have an excellent track record. While you work to earn money, they will help your money grow as is in their ability. Market fluctuations and other economic issues may prevent them from keeping your cash from growing, but they will help you look for opportunities or keep you on a sensible path otherwise.
Building wealth is possible in any economic environment, but it takes discipline, wisdom, and a little help. Chip Hutchison of the Hutchison Group Wealth Management company in Rock Hill, SC believes that wealth is attainable to all who are willing to make the sacrifices and choices necessary to achieve it. “Wealth means something different to each investor. What is common is one’s ability and willingness to make the right decisions as they go through life so they can realize their financial goals.” Follow these seven principles and your ability to create wealth will occur.
Wealth management is one of the most important subjects we write about because its not yours if you can't keep it. Please feel free to leave a comment with any questions you have. --- Chad Jennings National News Daily