How to build wealth in the long term. A simple and short guide:
1. Have a plan.
If you want to build wealth, you must have a written plan. This plan is also known as a budget.
2. Get out of debt, and stay out of debt.
Your most powerful wealth-building tool is your income. When you spend your whole life paying of a mortgage, bank and credit card loans and other financial obligations you end up with less money to save and invest for your future.
3. Live on less than you make.
Wealthy people don’t blow all their money on unnecessary things. The typical millionaire has never carried a credit card balance in their entire life, spends $200 or less on restaurants each month and still shops with coupons. The myth that most millionaires live lavish lifestyles that include expensive sport cars, throwing dinner parties every night or go on private jets, is actually a myth. t the end of the day, you should live on less than you make, so you have some money to invest. The more, the better.
4. Invest over a long period of time.
The quickest, right way to become wealthy is to consistently invest over a long period of time. This is the best way that works and it is as simply as that. Don’t get nervous about market swings, so not follow hot stocks that are trendy or “in” and do not get lured into get-rich-quick schemes.
Once you’re debt-free (you might have a mortgage on the house you are living in instead of paying rent) except for your home), have an emergency fund of 6 months expenses set aside, invest 15% of your gross income in the long term. Once you adopt the mindset of saving and investing, you might be surprised at how you’re able to build wealth, even with a low income.
The biggest obstacle to building wealth is debt. A lot of people are drowning in debt and end up working their entire lives just to meet payments that go right out of the door again. Your income is your greatest wealth-building tool but when it gets eaten up by debt, of course it is impossible to save for the future.
Sven Franssen