Doing anything well usually requires hard work. That's also true for using good personal finance techniques.
Here are some good strategies for building wealth, but take hard work to do:
- Pay yourself first. Most people pay their bills first and spend what's left over. This strategy requires putting money in savings first and then spending the rest. To me, this is an important element of building wealth. Yet, many people won't or can't take this step.
- Start saving early. The younger one starts the easier it is to build a bigger savings account. For example, saving $1/day for 30 years at 6% interest is worth $30,713. Saving $1/day for 50 years at 6% interest is worth $116,074. At 10% interest, the value is $69,632 and $537,687 for 30 and 50 years, respectively.
- Live below one's means. Living on 90 or 80% of one's salary helps builds savings and also helps reduce the impact of an economic downturn. In addition, it helps make the transition to retirement easier.
While I believe this are great strategies for building wealth, I don't seem many people doing them. I guess if these were easy to do, we'd all be wealthy:-)
For more on The Practice of Personal Finance, check back every Wednesday for a new segment.
This is not financial advice. Please consult a professional advisor.
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