There are some laws to wealth creation which are just what they are, proven laws. And if you follow them you will realize wealth. Understand however, that wealth is many different things to many different people. Most people hear wealth and automatically think of someone like Oprah Winfrey, Warren Buffett or Bill Gates. True, these individuals are mega wealthy, but that does not mean that their status is true wealth to everyone. You need to determine what it looks like to you for yourself in your own life.
Over my career in the financial industry I have come across many diverse and unique people. And just as diverse as one individual is from the other, so will be his or her strategy to wealth creation. Not everyone wants to be rich or overly wealthy but there is always one common thread; everyone wants to be financially free, happy and secure.
Here are The Five Laws to Wealth Creation.
1. Set Goals
Setting goals creates your personal roadmap. Start with the end in mind and work in reverse. If you need help with this consider working with a financial advisor for the answers to the following questions but always remember that you’re the boss. Ultimately all decisions are yours to make.
Where am I today financially? – Where do I want or need to be? – What strategies will I use to get there?
2. Reduce & Eliminate Debt
Many years ago a CFP and colleague of mine said this, “Trying to create wealth while having debt is like walking with cement blocks on your feet.” Debt is just that; cement blocks on your feet or a 50 ton boulder on your back. Imagine that you are wanting to create wealth for yourself and your family but you have a mountain of debt to get rid of… have you really created anything at all? If you’re truly committed to creating wealth you must get rid of all your “bad” debt.
3. Pay Yourself First
It is an ancient Babylonian theory that ’10 percent of all I make is mine to keep’. George S. Clason wrote what I consider to be a phenomenal book called, “The Richest Man in Babylon” and I encourage you to pick it up. This is the oldest and most proven law to creating wealth. Most of society is conditioned to paying “others” first like the telephone company, the gas and Electricity Company or the bank. I’m not suggesting that you do not be responsible and meet your obligations however, what I am suggesting is that as important as these expenses are, you must place your financial future above them. Understand that this is a process and you will not achieve this overnight. The thing to keep in mind however, is how much you earn is not what matters most, but instead how much you keep.
4. Buy. Hold. And Prosper.
Within financial circles it is advised to invest a portion of your income in something for example, real estate, businesses, precious metals, or stocks. I am not a fan of any paper derivatives so I won’t speak to the context. Solid, long-term assets are in my opinion the best to protect your money and future buying power. You may not be a savvy investor today and that’s okay because first you need to create the positive habits that put you in a position of choice. Once these laws become a part of your psyche then you can consider the various options available to you and begin creating your long-term wealth preservation process.
5. Remain Diligent and Stay Committed.
Along the way you will invariably be challenged by circumstances, life events, and just “stuff”. At times it may be difficult to look at your situation and see an eventual end. But stay the course and be diligent with the strategy that you’ve created. You may have to make small adjustments along the way and that is okay, just keep moving forward in the direction of the goals that you originally set out to achieve.