People don't become rich by accident. Even if someone is fortunate enough to inherit their wealth from family, it requires diligence to maintain it and make it grow. If you are seeking to improve your wealth steadily and prepare for a comfortable future, follow these practical tips to start saving and investing!
Set a spending limit
Are you money conscious? Before handing over your credit card or withdrawing cash from an ATM, do you ask yourself questions like “do I need this urgently?” or “can I afford it?”? A good way to make yourself more aware of money is to compare the amount you are spending to the amount of hours it takes to earn that amount of money. Suddenly, you’ll see things in a new light.
You can also deduct those necessary costs like rent, food and petrol from your weekly income to figure out how much money you have left to spend each week. Another good habit is to go through your monthly bank statements including your savings, as well as your credit and loan repayments. Review all spending and meanwhile check for bank errors, and ask yourself if there’s a way to reduce or eliminate any of those costs.
Increase your income
The two most common ways to increase your income are increasing your salary and building a side business. Find out what it takes to increase your salary in your current position. Improve yourself professionally and develop the skills which could increase the value you add to your company, and therefore increase the amount you get paid. Alternatively, create a side business in something you enjoy. It could be writing, designing or an online business – a great way to earn a little bit of extra cash!
Choose the right type of investment
The most successful and wealthy entrepreneurs and businessmen in the world made their millions through investment. Investment is a long-term process which takes time, learning and patience. You need to analyse financial situations and the changes in the market before you can make an informed decision – and after you invest, you need to keep an eye on the market for good opportunities to buy and sell. Where to invest your money depends on your investment strategy and risk aversion. Talk to an investment broker or an experienced investor who can help you figure out which type of investment is most suitable for you.
Do you spend a certain amount of time on your finances every week or every month? Regularly checking your wealth growth can help you make changes when necessary, cut out excess and maximize your income.
Take controllable risks
There are risks in any type of investment. Many entrepreneurs would tell you that they have failed many times before hitting it big. It is true, but make sure the potential reward is bigger than the risk you are going to take whenever possible to minimise your potential losses.
Set your goals
Building personal wealth requires a plan. A plan will give you a focus and help you achieve your goal more easily. Have a specific goal with a clear deadline, and make sure your goals don't contradict your principles and what you want out of your life. Your investment plan should also include items such as your investment choices, asset allocation and an emergency fund.
About the Author
Francesca has recently set up her Self-Managed Super Fund (SMSF), and is thinking about using Clime’s SMSF administration service to help her deal with the paperwork.