Peace & Blessings! This is Kinji R W Ridley, better known as the “The Wealth Builder” with this installment of Talking Dollars & Cents. Today we’re focusing on the secrets to building wealth. A common misconception about the wealthy is that they blow their money frivolously, acting as if money grows on trees (it technically does, but I digress). This couldn’t be any further from the truth. The wealthy put into practice key principles and activities that not only allow for them to keep their wealth but also grow it. Below are 8 Common Secrets they utilize.
1. Be frugal, not cheap
Being frugal means spending your money WISELY. Frugal spenders make a habit of buying the HIGHEST QUALITY PRODUCTS or SERVICES at the LOWEST price possible. They focus on QUALITY first and COST later.
2. Keep your spending in check
Use this breakdown for your take-home pay monthly:
Housing-25% or less (the wealthy tend to buy, not rent)
Cars-5% or less. This includes the monthly payment, insurance, gas, tolls, registration fees, and maintenance
Clothing-5% or less
Vacations-5% or less
Entertainment-10% or less
That’s 50% of your income. If you save a minimum of 10% and invest 20%, that leaves your debt payments at a max of 20%.
3. Surround yourself with fellow Saver-investors
Habits spread like wildfire throughout your social network. If your inner circle includes too many spenders, you’ll eventually become infected with their spending habits.
4. Understand NEED vs WANT
If you overvalue your wants, you’ll surrender to instant gratification, eschewing saving in order to buy things you crave right now. Want spenders routinely incur debt in order to finance their standard of living. They are UNDISCIPLINED with their money and create their own poverty.
5. Avoid EMOTIONAL purchases “Retail Therapy”
When you’re feeling overly optimistic about future income, you can fall into the trap of spending money you have or spending future money you expect to receive by incurring debt. When you feel sad or depressed, emotional purchases can act like a “quick fix” temporarily lifting you out of sadness.
6. Eliminate SPONTANEOUS spending
Everyone has about THREE hours of willpower daily, and it’s greatest after a good night’s sleep. When your willpower is high, you’ll make GOOD decisions. When willpower is low, you lose DISCIPLINE over your spending and other things.
7. Avoid lifestyle creep
When you increase your spending to match your income, you are falling victim to lifestyle creep.
8. Don’t Supersize your life
Supersizing your life is driven by excessive optimism about a sudden increase in income or wealth such as a large bonus, significant raise, inheritance, or other windfalls. The remedy-same house, same spouse, same car. Refuse to upgrade your lifestyle when your income or wealth rises significantly.
Utilizing these simple principles will make a huge difference in your finances over time. While they may not be what everyone else is doing, your goal should be to become a good steward of your finances, allowing them to grow and prosper.
Until next time. Be Blessed!
