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13 Basic Rules To Grow Your Wealth Effectively

13 Basic Rules To Grow Your Wealth Effectively

Perhaps you started this year vowing to grow personally, expand professionally, or simply grow up.  Do you also want to grow your wealth?

While no two financial pictures are exactly the same, healthy portfolios do have similarities. Follow these 13 rules to grow your wealth effectively.

Think of money as a tool.

That’s all those papers and coins are — a tool to get you what you want. They aren’t the only way, but it is a universally accepted exchange. Thinking of money as a tool empowers you to avoid many of the negative, intense emotions that can be associated with it, and to make rational, calm spending and saving decisions free of emotion. Money is a tool. That’s it.

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Accept that it takes time to expand your tool kit.

It takes time to grow wealth. Period. “Time” in this case means years, sometimes decades. This can be a frustrating concept for young folks who are rarin’ to earn that cash, accustomed to getting what they want with the click of a button and bombarded by stories of internet sensations who made it big overnight and photographs of 20-somethings with luxury cars and diamonds in their ears.

Define “wealth”…

Do you desire a fat bank account, for uses to be determined in the future? The ability to fund an expensive hobby, like horses or photography? The chance to take years off work and afford time to raise your young children? Your definition of “wealth” may, or may not, be a McMansion and six sports cars. Whatever your definition is, congratulations! You’ve established a goal that is yours. Your definition of “wealth” is the one that matters.

… then define “wealth” again.

Accept that you will end up spending vast amounts of money on unplanned expenses. Your car will break down. You will have kids before you’re financially ready. You or a loved one will incur a hefty medical bill. This is called life. Money, that tool we keep in our pockets, will help us meet life challenges. So take a deep breath, relax, and accept the fact that your financial goals will change time and time again. Staying calm during times of unexpected spending will help you keep your eye on the long-term prize; freaking out or giving up on your savings plan in the face of adversity will not.

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Acknowledge that cash is king.

If you can’t pay cash for it, you can’t afford it. Treat your credit cards like cash; this means sticking to a lifestyle that suits your income level so you don’t rack off more than you can afford, and paying them off regularly. Do your best to avoid assuming car loans — if you can’t pay the sticker price, search for a used car or take advantage of public transportation for as long as possible. If you have a take a home loan, keep it modest, and wait to look at homes until you can afford to put at least 20% down.

Save.

This is frequently repeated advice, and for good reason — the secret to growing wealth is to accumulate it. Read up on the latest from accountants and peruse personal stories online, check books out of the library, or hire a consultant through your bank to help with financial planning; however you do it, you must develop a savings plan. Once you have at least six months of living expenses for you and your family readily available, you can start to grow your wealth through different types of funds, according to the level of risk you want to assume.

Diversify your tool kit.

Talk to a certified professional about the benefits and drawbacks of savings accounts, stocks, certificates of deposit, IRAs, mutual funds, and any other number of savings and investment options. The key word here is “diversify.” You want to build a broad foundation, so that if something unfortunate happens to any one area of interest, your financial ship simply bobs along in a different direction, it doesn’t sink (and neither do you). Remember that purchasing land or a rental property, or upgrading a home you currently own are also ways to invest.

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Shop around until you find a no-fee, cash back credit card.

Avoid complicated rewards point structures, or even airfare cards unless you are a frequent traveler; it can be difficult to gauge whether you will actually use these rewards and the value back on each dollar that you spend can be minimal. Annual fees add up and mean you often end up paying for your plane ticket or hotel room yourself with the fee. Once you find a card you like, stick with it for maximum benefit to your credit score.

Shop around, period.

It is tempting to purchase what we want, when we see it. Online shopping, however, means that nearly every product can be compared to a competitor, whether in your community or across the globe. Take the time to compare prices before you buy, especially on big ticket items. Once you have a good feel for the market, don’t be shy about negotiating for a lower price from a local merchant if you find an item cheaper elsewhere.

Expand your mind.

Get creative in seeking out ways to increase income — there are a lot of ways to earn money out there. Make a list of your skills, whether learned in a professional setting or elsewhere, then hop online to do some research, and talk to everyone you meet about how to possibly leverage those skills. Your local chamber of commerce, or meet up groups advertised online, can be good places to start. It’s a freelancing nation, and you may be surprised at what and how much you can pick up on the side of conventional employment.

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Get your hands dirty.

Nothing is ever “too small” or “beneath you” in the money-growing game. Do not shirk from the hard jobs, the dirty jobs, or those that pay only a little in the beginning — pick them up, see where they go, and remember to save, save, save.

Find a good accountant.

Once you have money, you don’t want to give it away, do you? That’s exactly what you do come tax time — give your hard-earned cash back to the government. Tax codes are complicated, to say the least, so make sure you are giving exactly what you owe and not a penny more by enlisting the help of a seasoned professional. Though Certified Public Accountants are more expensive than do-it-yourself options, what they save you this year and in the years to come truly make this investment worth it.

Treat money management like a job.

Set aside time each week to review your financial accounts. If you’re starting out, this time may be as simple as going over your credit card statement to confirm that every charge is legitimate; if your financial picture is intricate and complicated, this could mean a weekly meeting with your financial planner or bank. Take time to study articles online, read a book from the library, or attend a local class that will teach you more about what all of those financial terms mean and how they apply to you.

Want to make progress today?  Find out The #1 Thing Stopping You From Becoming Rich Right Now 

Featured photo credit: Alan Cleaver via Flickr

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Last Updated on July 10, 2020

The Definitive Guide to Get out of Debt Fast (and Forever)

The Definitive Guide to Get out of Debt Fast (and Forever)

Debt can feel crushing, like a weight that is always weighing you down. Looking at those numbers, it can feel as if you’ll never get out from under it. However, if you really want to learn how to get out of debt, it is possible with a great deal of focus and self-control.

Getting out of debt isn’t impossible. Like any big goal, all that it takes is an action plan to identify where you are and creating a plan to zero out your debt.

Identifying All of Your Debts

The first part of paying off your debt is getting a complete picture of what you owe. When you have everything written out in front of you, it makes it much easier to create an action plan. Depending on how much you owe, it might also help you realize it’s not as bad you might have originally thought.

Here’s how you can get started identifying your debts:

1. Own Your Debt

Before you start identifying all of your debts, take a moment to process that you have debt but want to get out of it.

Forgive yourself for any past mistakes, missed payments, or overspending. It might be painful to accept how much debt you have at first, but you must own it.

2. Make a Debt Tracker

It’s astonishing how few people ever created a tracker to understand their total debts. Most likely, it comes from not wanting to accept the guilt of having debt, but, if avoided, it can make it nearly impossible to get out of debt.

Open up a new Google or Microsoft Excel sheet and list out all of your debts. Start with the name of the creditor, interest rates, total balance, loan term length (if any), and the minimum amount due each payment. This will include student loans, credit cards, and any other type of debt owed.

3. Get Your Debt Number

Once you’ve made your debt tracker and taken the other steps, identify your total payoff number. This is crucial, as you will have a starting point and a clear goal that you are trying to achieve.

Prioritizing Your Debts

All debt is not created equal. It’s imperative to understand that there are different types of debt.

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1. Understand Bad and Good Debts

Bad debts are usually paying for things you want instead of always need. While there might be some emergencies that max out your credit cards, often times it’s excessive spending[1].

There are three main types of bad debt:

  • Credit Card Debt: The average American household owes over $16,000 in credit card debt!
  • Auto Loan Debt: According to CNBC , the average auto loan in the US is $30,032!
  • Consumer Loan Debt: Consumer loan debt isn’t as common as credit card and auto loan debt, but it’s still considered bad as interest rates are usually between 10-28%.

Good debt is identified as investments in your future. Here are three common types of good debt:

  • Student Loan Debt
  • Mortgage Loan
  • Business Loans

2. Decide Which Debt to Pay off First

Once you know each type of debt and their interest rates, you can begin to pay off debt quickly.

Focus on paying off bad debt first, regardless of if it is a credit card or auto loan. Start by paying off the loan with the highest interest rate first.

If you have several credit cards with different interest rates, you want to focus on the one with a higher APR. You will actually save more money by eliminating the card with the highest interest rate.

3. Don’t Pay the Minimum Amount

Paying the minimum amount digs you into a hole as interest rates will offset your payment. Even a small amount more than the minimum can help you pay off debt much faster.

Removing Obstacles to Pay off Debt Quickly

Creating a debt tracker and prioritizing a plan is simple, but avoiding temptation can be difficult.

1. Set a Reminder to Track Your Debt

“If you can’t measure it you can’t manage it.” -Peter Drucker

It’s so important to track your debt to ensure that you get it paid off quickly. Similar to working out and measuring your results, you need to track your debt constantly. Start with a weekly reminder, where you sign on and log your updated number. Did you increase, decrease, or stay the same?

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Regularly tracking your student loan balance can be incredibly motivating, as well. You will get a huge confidence boost each time you see your total debt amount decreases.

Set weekly and monthly goals so you can have short term wins and keep the momentum going.

2. Hide Your Credit Cards

If your biggest debt is credit cards, you need to eliminate temptation and remove them from your wallet.

Some people have gone to extreme measures by freezing their credit cards. Why? This would create an ice block around your card, which would require you to chip away at it slowly. This will give you time to think if it’s the best idea to buy that thing you’re about to buy.

3. Automate Everything

Willpower can be a huge downfall to paying off your debt. By automating your bills each month, you will ensure that willpower isn’t involved.

4. Plan Ahead

Getting out of debt will require some sacrifices, but with enough planning, you can make it work.

For example, if you know that you have a friend’s birthday or family dinner coming up, plan ahead for the costs. Whether you need to cut back on spending the week before, pick up a side job, or meet them after dinner, do what is needed.

5. Live Cheaply

The only way to get out of debt is to make some sacrifices on your spending habits. Find ways to save money each month so you can apply that amount to your outstanding debts. Here are some ways to save money each month:

  • Live with roommates
  • Cook dinners and prepare lunches for work instead of eating out
  • Cut cable and choose Netflix or Amazon Prime
  • Take public transit or bike to work

Finding the Lowest Interest Rates

The higher your interest rates, the harder (and longer) it will take you to pay off any debt.

If possible, you want to find ways to lower your interest rates to help get out of debt quickly. Here’s how you can get started:

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1. Maintain a High Credit Score

Your credit score will have a large impact on your ability to refinance your loans and receive a lower interest rate. If you have a low credit score, it’s unlikely you will be able to refinance your loans. Use these credit tips to increase and maintain an excellent score:

  • Never miss a payment
  • Don’t exceed 30% of your credit limit
  • Don’t sign up for more than one card at once
  • Limit hard inquires, like auto-loans and new credit cards
  • Monitor frequently with free credit-tracking software

2. Find Balance Transfer Offers

Start by opening a free account on credit.com. Credit.com offers you the chance to open a free account and see what type of balance transfer offers you can receive. Some of your existing credit cards might already have 0% or lower APR balance transfer offers available.

Contact each of your credit card providers to ask about lowering your rate for a one-time balance transfer offer[2].

If you do take advantage of this option, make sure that you use a balance transfer and not a cash advance. Cash advances have a ton of high interest fees (15-25%, depending on your credit card) and will only compound your debt problem.

How to Get Rid of Debt Forever

Setting up a plan, removing temptations, and getting the lowest interest rates is the first step to get out of debt.

1. Keep Monitoring and Adjusting

Once you have a plan, don’t get comfortable. Track your debt payoff plan and make the necessary adjustments when needed.

Monitor your credit scores with a free site like CreditKarma. The higher your credit score climbs, the more likely you will be to secure a new, lower-interest loan.

2. Earn More Money

There are only so many ways to save money. Instead of clipping another coupon or making sacrifices for your morning coffee, find ways to earn more money!

Think about it…it is much easier to find ways to earn an extra $1,000 per month than find $1,000 to cut from your budget.

Here are some examples of ways to earn more money:

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Talk to Your Boss

Have a conversation with your boss about current salary and/or commission rates. If you’re not satisfied or want a change, don’t be afraid to look around at other positions. Some of them might even have a student loan debt reimbursement plan!

Start a Side Hustle

This could be coaching students on the weekends, driving for Uber, or taking paid online surveys. There are tons of ways to make money outside your 9-5. Now that you have a clear plan to pay off your debts, you’ll be more motivated than ever to figure out creative new ways to earn money.

Build an Online Business

There are so many websites and blogs that earn money from ads, affiliates, and other online products. Find your niche and get started.

3. Celebrate Your Wins

As you progress in your debt payoff journey, don’t forget to celebrate your wins. You need to always reward yourself for the hard work and discipline that is required to get out of debt.

While you shouldn’t celebrate so big that it increases debt, make sure to factor in little rewards to keep you motivated.

4. Set New Financial Goals

Eventually, with a plan and these steps, you can rid yourself of your debt. Once you do, make sure to celebrate your monumental achievement, but don’t stop there.

Now, you can focus on acquiring wealth and increasing your net worth. Set new financial goals so you have a new target to aim toward. Here’s how to set financial goals and actually meet them.

These could be anything now that you are debt free! Think about where you want to travel, buying your first home, or saving for your future retirement. Just like before, make sure that your goals are specific, measurable, and achievable.

Conclusion

Congrats, you can now set a plan in motion to finally pay off your debt quickly (and hopefully forever)!

Remember, if you want to get out of debt quickly, it’s not always easy. Just like any big goal, there will be sacrifices, challenges, and problems to overcome.

More Tips on Getting out of Debt

Featured photo credit: Pepi Stojanovski via unsplash.com

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