The secrets of becoming rich

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Submitted by Matthew Needham on 16 Comments

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photo credit: 1suisse

How to make your millions…

Making money is quite a simple process in theory, but like all the best journeys the road is not always straight forward.

In this post we look at the 6 steps to financial success, which will be covered in more detail in separate posts over the rest of the month.

There is no easy way to get rich. Well, not unless you discount winning the lottery or inherriting a fortune. Getting rich

1. Control debt
2. Ruthless control spending on things not important to you
3. Start saving
4. Start investing
5. Stat a pension
6. Start a business

Control your debt

Many of us have debt, either in the form of credit cards, student loans or mortgages. By debt I’m refereing to the debt that you fund your purchases on. Namely credit cards, store cards and personal loans.

Chances are that these have been taken out to fund purchases, which maybe you don’t use anymore or maybe you can’t fit in to those nice designer clothes now?

Sadly many of us are still paying for things they’ve bought, long after they’ve forgotten that they ever had them.

So, consequently the first step to becoming rich is to be rigourous with how you clear this debt. Many people will realise that if you just pay the minimum balance, it will take years to clear the debt. It’s all very well for some bright spark to say pay more than the minimum amount, but if you really can’t afford any more than the minimum payment, then it’s no great help. In later posts we will challenge if this is really true.

What a lot of people don’t realise though is that you don’t just have to pay your credit card once a month. There’s nothing stopping you splitting your minimum payment into 4 and paying it weekly. Or fixing the amount you pay rather than the minimum percentage demanded by the credit card company.

Spend money on the things you love

This is not a series of posts about telling you to cut back on your morning Starbucks or cancelling the paper. It’s about looking at what you spend your money on and radically cutting back on the things that aren’t important to you. For example, I like living in my house but I’m not particularly bothered who supplies my electricity as long as when I switch on the light it lights up.

If it’s not important to you have a big house, live in a smaller one, or get a lodger.

Start saving

The secret to being rich is to start saving as early and as regularly as possible. For example if you save £100 per month for 10 years then you’ll have £12,000 (c$20k) and that’s not even accounting for interest.

Start investing

Similarly, the earlier you start investing, the earlier you’ll start to reap the rewards for your efforts. The long term average of the UK Share indexes is s retrun of around 8%. The earlier you get started, the longer this will have to take effect and deliver substantial returns.

FREE Money – Start a Pension

Many employers offer pension schemes which although have had some bad press over recent years are effectively a source of free money to you. This is not only because the Government provides tax incentives for you to save into a pension, but quite often the employer will provide an additional contribution or matching for what you put in it. Put another way, if someone was giving you money, would you say “no thank you?”

Start a business

Once you have the basics provided for, you can look at other opportunities to generate additional income for you which maybe starting a business in your spare time or investing in rental properties.

Building the foundations first will help you get rich and build a sustainable base for yourself and your family.

So, what do you think?

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16 Comments »

Eric
Twitter: bluepop13
said:

I think you made some good points here. I personally want to learn more about investing and creating assets that make me money each month to live on and that cover my total expenses and then some. I want to learn about this and start doing this so that I don’t have to worry about just working my entire life should I choose other things I’d want to do.

Good post and I always have liked the saying of spending your way to being rich.
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