Wealth Creation
Steps to Wealth Creation
There are several steps to wealth creation that almost anybody on any income level can take. All these steps to wealth creation take is the discipline to implement and practice them.
Step 1) Pay Yourself First – The reason why many people don’t create wealth is that they don’t pay themselves. The first thing a person should do when they receive any sort of payment is to take a portion of it and place it in a savings or investment account. An individual should do this before paying bills or covering regular expenses. A good rule of thumb is to save 10% of your income every month regardless of pay or expenses.
Do this even before you pay off your debts. Many people don’t create wealth because they fall into the trap of paying off their debts before saving. Pay yourself then pay off your debts. Quite a few “get out of debt” and get right back in it because they have no savings and end up using credit cards to cover expenses in emergencies.
If you are being paid by direct deposit, an excellent means of doing this would be to have 10% of your income go to your savings account every month. Have the money automatically go in then pay bills and other expenses from what’s left over. Simply doing this can enable you to save several thousand dollars a year.
Step 2) Be Aware of Inflation – Inflation is one of the big uickly enemies of wealth creation. Always be aware of the rate of inflation because it can qdestroy wealth. For example if inflation is 4% and your savings pays an interest rate of 3% annually you are actually loosing 1% of the funds you are putting in your savings. The return on investments must always exceed the rate of inflation or you will loose money on investments.
Inflation of currency is another enemy of wealth creation. Many people think they are creating wealth because they have a lot of cash on hand. In many cases their money is actually worth less because the value of the money falls. It is always to better to keep as much of your income as possible in investments like stocks, real estate or even precious metals rather than cash. Most currencies decline in value over time due to inflation.
Step 3) Limit Borrowing and Credit Use – The biggest deterrent to wealth creation among average people is the overuse of credit. Any money you borrow or credit will eventually have to be paid back which will reduce your future wealth. Limiting the use of credit cards and loans is always a good means of wealth creation. A good way to do this is to limit the use of credit or loans to only vital or unavoidable purchases. One method of doing this is to reserve credit cards for emergency use.
If you must borrow locate the lowest interest rates you can and pay off the debt as quickly as possible. Look for credit with lower interest rates such as lines of credit on real estate.
Step 4) Have a Wealth Creation Plan – Sit down and devise a wealth creation plan. Writing up a budget that includes 10% savings and how much you plan to invest. The plan should include a budget that regulates your monthly savings.
About the Author
Author writes for www.worldcashmaker.com
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