Wednesday, January 25, 2012

Wealth Building Activities

In my experience, I've learned there are several financial activities that helped build our wealth.   Although the activities can be challenging to do, making them habits can be a great enabler.  Here were the financial activities that I found helpful.
  • Living below our means.  I consider this our number one wealth building activity because it meant we had money beyond our expenses, grew our savings and created an emergency fund.  We have lived a comfortable but not extravagant lifestyle.   For reference, here are some examples of products or services we don't have:  cable or satellite service, gym memberships, smart phones, flat screen TV, and local newspaper subscription.  We pay cash for our cars and they will turn eight years old in 2012..  My spouse has a pre-paid cell phone.  I don't have a cell phone. 

    When I received a raise, we would put most of it into savings and use only a small part to increase our lifestyle.  Before  I retired, we were saving 20-30% of my gross salary each month.

  • Avoiding  debt.  With the exception of college, cars and homes, we never used debt to make a purchase. Even so, we've have been able to eliminate these sources of debt. We've paid off our college loans and are saving so that our daughter won't need significant loans.   While we financed our first cars, I've paid cash for the three cars since then.  My spouse has paid cash for her car since we've been married. Finally, in 2009, we paid off our mortgage since our bank would not refinance the loan.

  • Earning more.  Although my starting salary as an engineer was good, it would have been impossible to save enough to retire if there was no salary growth.  During my 27 years of employment, my base salary increased eightfold by the time I retired.   This enabled us to have a comfortable lifestyle and still make significant contributions to savings.
  • These activities worked for us.  Despite the economic crises of the past decade, I still believe these activities are still important to building wealth. 

    For more on The Practice of Personal Finance, check back every Wednesday  for a new segment.

    This is not financial  or wealth advice. Please consult a professional advisor.

    Copyright © 2012 Achievement Catalyst, LLC

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