Not all wealthy people were rich to begin with. If we are to study their success, it was more about the hard work they did - to the best of their ability. There are financial lessons or practices that we can learn from their character:
1.) Save as much as we possibly can
The first and foremost command is to pay ourselves first. Saving 10 to 20 percent of our income as our payment is a good idea. To do it with an even bigger percentage is even better. What we save can easily raise capital for business and investments.
We must have a long term vision of saving to be prosperous. At one point or another, we could be needing access to a huge amount of funds. Before that happens, we must be ready to save up for it as early as possible.
2.) Reinvest our profits
In financial planning, we were taught the power of compounding interest. That is, our interest earns additional interest. This same principle can be applied to business and investment. Rather than cashing in on our profit, pour it back into the business for expansion so that the profits will grow exponentially.
3.) Practice delayed gratification
The richest people are the ones who have overcome tremendous odds to reach the level of their wealth. During that time, they disciplined themselves not to spend on unnecessary expenses till they reached their set goals.
4.) Pay in cash
Paying in cash in some cases, can sometimes give you the advantage of a discount. No matter how small the discount is, take advantage of it. Besides, the practice of using cash as opposed to credit is that we can be more disciplined in our spending habits and can monitor them closely too.
5.) Be debt free
Let's pride ourselves in being debt free. As much as possible, never carry any debt at all. If however it is beyond our control, only go for 'good debt' - one that we can leverage on to expand our businesses. And even if we have to borrow money, keep it to the minimum. Bear in mind that money borrowed means there is extra interest to be paid back.
6.) Create multiple sources of income
It is a reality that no particular business will fare well at all times. Thus, we must be prepared with multiple sources of income to act as a cushion. Additional income means more savings; and more savings mean more money to invest.
7.) Be reasonable
As we achieve our financial freedom, we will have the ability to share with others. Remember that it's not an idea of complete selflessness nor it is about selfishness. There is always a limit and a balance to everything.
If you really want a start to financial freedom...stay tuned and we will take this journey together. Let's look forward to more encouragement next week. For now, chew on what we have discussed today. See you next week.
Yours
Annie
Its kind of hard to speak about finances with some people they make out that they have no money at all, but really they earn more than you - but are super bad stewards of their own money. And complain all the time that other people have more than them. At present we are house rich, cash poor. When we are mortgage free our life will change dramatically. And I dont mean when we are retired. I mean in the next year or 2. We need to be on top of it all and moving forward.
ReplyDeleteI am hoping to do a little series on what I have learnt through my qualifications. Like my mini series about selling your house. Those were popular.
Great start to a new blog. I personally love number 2 and number 6. Number 6 will be our key when we move to Cornwall. We arent going to retire, we are going to have a better work/life balance.
Will be back for the next installment.
Doing a mini series on house selling is a great idea, specially in the UK...more so as you understand those issues through your experiences.
ReplyDeleteTo be honest, I don't quite get the concept of retirement...perhaps it will click one day, or maybe - never?! But YES to better work/life balance! Have a great year!!...it starts today:)