Wealth is one of those things that no one can really explain where the line from not wealthy to wealth becomes.
We all know it includes money and riches, but exactly how much do you need to be considered wealthy? And is money the only criteria?
In my mind, wealth is different from the word rich. I read once that to be considered rich that you need five million in net worth, but wealth has no such line.
I think that’s why I prefer to term. Wealth conveys more a lifestyle and way of being. You can live a wealthy life without being traditionally rich.
That’s why the pursuit of wealth is
That’s why the journey to wealth never ends. And it can be oh so fun getting there. But where do you start?
1. Know Thy Income & Expenses
The first step in making a plan towards wealth is to understand what you’re working with.
That means you’re going to have make a *shudder* budget.
I get it. You’re rolling your eyes right now. Budgets just aren’t sexy, no matter how much we all want to make it so.
But they are necessary.
Because they allow you to document and track the money that’s coming into your life and understand where that evaporating cash in your wallet ends up.
How you budget is entirely up to you. You could use an app, a journal, a spreadsheet. Doesn’t matter. Use whatever is simplest.
For me personally, my main budget is in a speadsheet. I do a quick forecast budget on paper before the month starts so I have a rough idea what I’m working with, but the actual figures get recorded in a spreadsheet down to the last cent.
Don’t overcomplicate this process. Just record your income and your spending somewhere. After a few weeks
2. Stop Your Overspending
We all do it sometimes. Yeah, even me and I know better.
Overspending is not something to beat yourself up over, but it’s also not something that you want to make a weekly occurrence.
Now that you have all your income and spending written down, you will start seeing where you can cut back to free up more cash.
Prioritise all those things that are important to you, that you’d be miserable if you had to give up.
Sure, most financial writers will tell you to give up things like takeaway coffee or that gym membership, but the truth is that just because those things aren’t important to me (I prefer to make my own coffee at home and workout using free Youtube videos), doesn’t mean those things aren’t important to you.
But there will be things that you can live without.
The main goal is to keep everything thats important and cut back or ditch completely the rest.
Not only will it save you money, it’ll hone your priorities to doing only the things you love.
Don’t think just because everyone else pays for something that you need to do it too. Really question why you’re paying money for some things that you might not care about.
3. Slash That Debt
With the money that you found in your budget from cutting back, now is the time to tackle any debt you have.
There are many ways to tackle debt from choosing the highest interest rate or the lowest balance.
Both are fine. But really, it doesn’t matter a whole lot. One will save you a bit of interest, the other is super motivating when you slash a debt off your list.
Really though, the main trick is just to focus on one debt at a time and pay the minimum on the rest.
So pick one. Whichever one would make you feel the best when it’s gone is usually the best one to focus on first. There are no rules.
Make it a priority to pay down that debt using all the spare cash you have.
They say whatever you focus on – you acheive.
I’ve found that to be very true.
4. Start a Savings Plan
Once your debt plan is under way (or you’ve got rid of it altogether – go you!) now it’s time to focus on building savings.
There are two things that you should save for first, before anything else.
That’s your emergency fund and your yearly expenses fund.
Your emergency fund should be between $500 and $2000. It’ll cover anything that comes up that you need quick cash for. So things like car repairs or emergency travel. It’s so you won’t have to use your credit card where you might have had to before.
It’s not for everyday extravagances, no matter how much you think you simply must have it. Just for, well, emergencies.
Next thing to save for is those big yearly expenses. Like car insurance or the annual vacation.
For these, it’s good to put away money every paycheck. Just calculate how much you need each year, add some extra as a buffer, and divide by how often you get paid.
That means when that yearly thing rolls around you’ll have the money for it. No worries.
And the third thing to save for is that big expensive thing you’ve always wanted. A house deposit, an overseas adventure. The fun stuff.
Saving will become faster and easier if you’re always saving for something exciting. Something that motivates you. If you finally get to the balance you need, then choose something else and begin saving for that next.
Always be saving.
5. Invest The Rest
And finally, start an investment plan for your future.
I invest in the stockmarket. It’s my passion and has proven very profitable.
But there are other things to invest in. Like real estate or business. Or even investing in yourself with further education.
Personally I’ll always have a bias towards the stock market though. It’s what I know and prefer. It’s simple and straightforward. But I understand it’s not for everyone.
There you go. The five simple steps to wealth.
- The first step is tracking your spending and income. It’s the foundation for everything that will come later. You need to know where your money is going.
- Cutting back spending is the next step. Keep the things you love, dump the rest. Make it a priority to always have money left over.
- The next is getting out of debt. Becoming debt free will take you a long way in your quest for wealth. In fact, if you do nothing else and get to this step, no debt and living below your means, you can consider yourself wealthy.
- Of course, life should be about more. That’s why saving is important. First for the stuff that will prevent any future debt (your emergency fund and yearly expenses fund) and then for the big things that will give you joy and purpose. The goal is to dream of what you want and pursue it.
- And finally, it’s to invest. Investing is more about the long-term future. Investing will build your wealth more than any savings plan ever will.
Those are the steps to wealth.
I hope you’ve found this useful. I have a book that goes into more detail on this, but really this blog post is probably all you need.
It’s about keeping things simple and only focusing on what makes you happy.
Because at the end of the day. If you’re happy, you’re free. And that makes you incredibly wealthly.
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