Many people dream of becoming rich. They feel finally feeling the money. They wonder what it would be like to never have to worry about money again. And yes, they imagine a few things, like a fun vacation and a night in the countryside. Most of these people consider “getting rich” and making money. Or they consider being rich with a big house and a nice car. But this is what…
Earning a lot of money will not make you rich. And if the bank owns your car and your house – no matter how big and beautiful – then you are not rich. You are another debtor, living beyond your means.
Being rich means you accumulate money. It means you are making your money work. This means that you own your assets (instead of having the bank’s assets with high monthly payments bothering you). If you want to be that kind of rich, check out these three keys to wealth. They may be simple, but don’t ignore them for their simplicity…
Key #1: Earn money
This may be the obvious key. To start building this savings account, you need to earn money. It could be through work. It can come from the office. It can even come from a combination of work and business. But the point is that you need to make money regularly. But, most importantly, this source of income must always be what you need for your budget. Which brings us to the second key…
Key #2: Save money
Many people who start earning money make that money burn a hole in their pocket. They just have to spend it. And sometimes they end up in nickel and dim to death.
For example, quality coffee and Starbucks muffins twice a day can cost a few thousand dollars a year. Going “on the night” four or five times a month is another way to get a lot of money in your bank account quickly.
Or what about some of those bills you pay without even thinking about it, like your cable bill? Many people pay over $100 for hundreds of channels they don’t watch. These are the types of debt that you can reduce quickly without feeling like you are making a huge sacrifice. Which brings us to another point…
How much do you have to sacrifice, anyway?
The answer depends on how rich you want to be, how much you currently save, and how much you currently spend. And here’s some good news: it’s all about balance.
Look, you can’t eat a 10 percent Top Ramen soup packet at every meal. You don’t sell your car and start driving. You don’t have to live in a box on the street just to save money on the mortgage or rent. After all, the future is not guaranteed. So it won’t do you much good if you sacrifice your whole life just to die with a few million dollars in the bank. So what you need to do is to know about your financial future. The way to do that is to set goals. First, you need to save money for emergencies. Typically, this means putting about six months of living expenses into an easily accessible savings account. That way, if you get fired, your business goes down, you get sick, or something else comes up that you’re always getting into, you’ll be fine. You will also have six months of adoption. Second, you probably have short-term savings goals. For example, maybe you want to save a few thousand dollars for a vacation next year. Or maybe you have another big purchase coming up, like a home improvement or renovation, a wedding, or another event.
In any case, you need to figure out exactly how much money you need and when you need it. Then, you can figure out how much money you need to save each month to reach your goal.
What about retirement and other long-term savings goals? Well, you need to save money every month for your retirement. However, you don’t want to put all that money in a savings account. Instead, what you want to do is use it to grow. Which brings us to the third key…
Key #3: Invest
The final key to wealth is to make your money work for you. But that means you have to invest it.
Now, the good news is that there are many ways to invest your money, so you can find the balance that suits your needs. Here are some of the most popular methods:
• Mutual funds.
• Invest directly in business (your own or someone else’s business).
• Works of art, antiques, precious metals.
• Real Estate.
You should consider your own risk tolerance and choose investments that best fit your risk tolerance. Your risk tolerance depends on factors such as how many years you have to save for a particular goal, as well as how comfortable you are with certain types of investments.
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