My friend, Jim, loved adverbs passionately. He thought they were such descriptive words adding to the weight of the statement. It disappointed him when people used an adjective wrongly when an adverb was not only correct, but much better. I know how he feels, so in this article I will use the adverb comprehensively.
1. Devise a plan meticulously.
Any successful investor has a plan. The plan must be realistic, suitable, and achievable. For example, if you set yourself to obtain $1 000 000 000 000 then you must have some very well thought out plans to achieve this. If you start from a low savings base, then one billion dollars may be totally unrealistic.
Firstly, assess what you have to begin with, then add a suitable plan to grow this sum. While I will cover the strategies to enlarge the savings and wealth substantially later in this paper, it is time to formulate some ideas as to the future direction of the wealth building methods.
If you choose to use real estate to build your wealth, is there ample opportunity where you live to obtain good rental income and capital growth. Should you be a more conservative investor, the question arises whether or not you have explored the opportunities in the fixed interest market.
If you seek to become a billionaire, should you fail to make much progress, will you lose heart and quit altogether? This is the importance of having an achievable goal. It does not matter how high you set your dreams, make very sure that you will make progress towards these dreams so that you will be pleased with the results you have achieved.
This does not mean that you will become complacent and settle for something less then you have desired, but it does mean that, to remain focussed, you must be able to chalk up the milestones as you pass them.
2. Set a budget carefully
How are you going to accumulate the capital to invest to make you wealthy?
Investment gurus have come up with many simple, not so simple and some quite ridiculous schemes to help you set and keep a budget.
One I read of recently though I have seen it before is to pay yourself a wage. The basis for for this is that you are the most important person in your life – by the way, I do not agree with this statement if you are married and have a family – so pay yourself a weekly wage, say of 10% of your take home pay. The 10% figure is derived from the fact that certain religions impose tithing on their adherents and if they can live on 90% of their take-home pay then so can anybody. Often these religions impose dietary restrictions on the adherents as well and this can cause them to have a less expensive diet or restrict some of life's pleasures which also enable them to save money.
In my opinion, budgeting begins with an assessment of detailing what are essential costs, what is discretionary spending and what falls alarmingly into the category of downright waste. I would begin with the waste first and eliminate that. This should be the easy one. If you can see sufficient savings from this area, then the other areas may not be examined so carefully.
On the other hand, seeing you are going through the budgetary process then it is probably wise to complete the whole exercise. If this is the case, then discretionary spending should be examined next. Do you need that new outfit? Do you need to rack up credit card debt? Ask yourself these and similar questions to see where you can save money.
3. Proceed confidently
I once read that savings equals wealth. I do not agree with this simple definition though there is some veracity in it.
I cannot fail to wonder at the people, so many of them , who seem to have no money whatsoever. I read of a man who was down to his last dollar so invested it in a gambling game, and you guessed it, his number came up and he won a million dollars. How could someone be so foolish to risk everything on a gambling game when he was down to his last dollar? How can someone be down to his last dollar?
The reason that I do not agree with the statement that savings equals wealth is that some peoples savings are meagre indeed and they cannot be regarded as being wealthy by any definition. It is what you do with your savings that ultimately determine whether you will end up wealthy.
Remember that it is both income and capital growth that determines the wealth ultimately. Generally the higher the return, the greater the risk. In your planning, you should have decided on the level of return that you need to generate the wealth, the level of risk that you are comfortable with and the rate of growth that you need to establish your goals.
Essentially there are three investment vehicles, cash, shares and property. These can be utilised in a number of ways and during the planning stages, you should determine whether you will invest in all three – the safest option- or what combination you may otherwise choose. The amount of your starting capital may also have a bearing on what categories you use.
Within each category, there are subsets which should have been carefully assessed to see whether these provide you with the diversity and safety you desire. For example, should you choose the equity market, shares may be traded or you may select options or even warrants. These offer greater or lesser rates of return together with differing risk profiles. What you choose should have been carefully assessed during the planing stage.
Once you have made all your choices, proceed confidently, monitoring your progress carefully and systematically to ensure that you reach your goal successfully.
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