One of the goals many of us have is to grow our wealth over time. In many cases, it’s more about the financial security and the ability to live a comfortable lifestyle, than it is about racking a huge net worth. Regardless of your goal, adherence to these 5 basic principles can take you a long way if you want to grow your wealth over time.
This is the most basic of basic financial principles. It comes up over and over again. However, it bears repeating. You can’t grow your wealth if you’re constantly overspending. The ability to grow wealth depends on having assets rather than liabilities, and when you live beyond your means, all you end up with are liabilities.
It’s much harder to build wealth when you don’t take some risks. I’m not talking about trying to pick a winning stock and using a great deal of margin to try and make it big in one fell swoop. That’s more of a fool’s risk than it is a calculated risk.
Instead, I’m talking about the type of calculated risks involved in boring long-term investing. Consider index funds and ETFs, and if you do decide to invest in individual stocks, look for value stocks.
Without taking some risk with your portfolio, you will be unlikely to earn the sort of interest that results in long-term wealth. The yield you get on your perfectly safe savings account won’t be enough to build your wealth over time. Take a risk or two if you want to see solid progress as you build wealth.
You don’t have to be a penny pincher in order to build wealth over time. It’s possible to spend a little extra sometimes, and enjoy life. The trick is to spend smart. When you make purchases, make sure that you are getting true value. You don’t want to overpay, but at the same time it makes sense to get something of good quality so you only have to buy it once. Also, spend money on proper maintenance so that things don’t end up in worse shape down the road. Judicious spending is part of growing your wealth.
Additionally, only spend money on things that are important to you. Figure out your spending priorities and stick to them. If you don’t have a purpose for it, or if it isn’t enriching your life, don’t spend money on it.
You are your own best asset. As a result, you should be striving to improve yourself. One of the things that sets the financially successful apart is that they look to be educated, rather than entertained all the time. This education doesn’t have to be the formal kind that ends in a degree, either.
Think about how you can improve your skills so that you are more marketable and so that you can qualify for that raise or promotion. Learn the basics of business and start a side hustle. Even just learning more about how money works can be a helpful way to increase your knowledge and make the most of your financial resources to help you build wealth.
Many financial experts point out that giving is part of a well-rounded financial life. Many of those who are wealthy make it a point to give to charity, and to give in other ways. For those who believe that blessings come from giving, this is just one way to be rewarded for generosity.
Even if you don’t believe you will be blessed for giving, there’s something about a giving attitude that can help make your life richer in general. Plus, if you make giving a priority, you are more likely to manage your finances carefully so that you have enough to accomplish all of your goals.
The foundation for growing wealth is a fairly simple one, but it’s not always easy to carry out your efforts. However, with a little planning, and by really thinking about your situation, it is possible to build wealth by sticking with a few simple ideas.
Photo by Alan Cleaver.
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I'm just an average mom, trying to live a frugal life and get out of debt. I write about things that have (and haven't) worked to improve my family's financial situation. What works for me may or may not work for you, and you should always consult a financial advisor before making important financial decisions.
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