You don’t have to be incredibly intelligent and born into the Rockefeller family to attain wealth. Below are some pointers commonly shared by wealthy people on how to manage your life and your money to reach financial independence. There is no magic, achieving financial security involves straight forward, common sense actions to gradually build your net worth.
- Write Down Your Goals: It’s great to dream about what you want to achieve but to accomplish something you need to put your goals into writing and create an action plan to attain them.
- Control Your Expenses: Take the time to understand and manage your expenses and create a budget that supports your goals. Spend less than you earn and develop good saving habits. Keep your expenses in check when things are going well and avoid automatically increasing your expenses as your income grows.
- Don’t Buy Status: Don’t buy things to look rich or to impress your friends. Most wealthy people drive older model used vehicles and live in modest homes. Use your money to save for the future and spend on what really matters.
- Educate Yourself: Getting a good education and selecting the right career is a huge factor in attaining wealth. A good education can result in a more rewarding job in a field you enjoy. If you enjoy your work you are more likely to excel and earn more money. If you are in a dead end job or a career you don’t enjoy consider going back to school to transition into a career for which you have more passion.
- Be Patient and Maintain a Long Term Perspective – The key to successful investing is having the patience to ride out fluctuations in the market. Resist the temptation to chase returns and time the market. Invest for the long term and let your portfolio grow over time. Stay the course and avoid making decisions triggered by emotions.
- Manage Risk and Return – Balance your desire for high return with the risk involved. Maintain a diversified portfolio with adequate short term liquidity to get you through rough spots in the market. Rebalance on an annual basis to keep your portfolio diversified. Take a disciplined approach to investing and avoid high risk investments that promise a return that may be too good to be true.
- Start your own business – According to Forbes nearly all of the people on their list of billionaires made their money through involvement with a business they or their family had started. Owning your own business may seem too risky but it can provide you with an opportunity for higher earnings and greater control over your financial future.
- Avoid Complex Investments – Avoid investing in anything that seems overly complicated or that you don’t fully understand. Complex investments often come with greater risk, a lack of control, limited marketability, limited transparency and hidden fees.