29 Mar The Step-By-Step Guide to Growing Wealth
Growing personal wealth is often touted by motivational speakers and “gurus” as something exciting and energetic. The reality, however, is that wealth creation is a formulaic, methodical and almost boring process. There are no major secrets hidden from the masses by the ultra-rich, and anyone who says they know the secret to getting rich quickly, should just do it themselves, rather than selling the dream. Here is an example of a simple, step-by-step process to growing your personal wealth.
Step 1 – Purchase Property
This isn’t to say you shouldn’t invest in other areas, but make sure that property forms at least a part of your investment strategy. It is statistically the best option when it comes to values increasing over time, and is an eternal commodity – meaning that it will always be required and have value.
Step 2 – Leverage
There is a difference between saving and failing to leverage. Saving means that you have money, and you make the conscious decision not to spend it. Failing to leverage means that you have an underutilised resource and fail to optimise it. An example of leveragable equity would be the equity in an investment property. It serves no purpose other than to exist, and until it is leveraged into something else, is a poor resource. Step 2 is to leverage available resources in order to optimise them.
Step 3 – Plan
Step 3 is actually Step 1, but nobody wants to talk about planning, so it’s sent down the list. Planning is by far the most important step to creating sustainable long-term wealth. It involves an analysis of your current resources, including your salary and any other income, your property, investments, debts, credit cards, outgoings, and anything else. Then, benchmarks can be created. These “signs on the road” let you know when it is time to take the next step. An example would be that once a certain amount of equity is available in a property, that equity is then to be transitioned to an investment loan, and invested in X investment. Or, another property is to be purchased once a certain amount is paid off an existing property.
A plan creates a scientific and strategic journey from where you are now, to where you want to be. The most exciting part is that long-term financial goals become more than just aspirations – they have a structured plan behind them, and are backed by a robust strategy.
Step 4 – Don’t Get Seduced
Growing wealth doesn’t have to involve living on next to nothing and eating baked beans every night. But there is a certain amount of sacrifice required, and you will recognise that sacrifice when you see it. With a plan in place, you may need to make some tough choices when it comes to purchasing cars, going on holidays or anything else that involves moving your investment resources from where they are, to where they shouldn’t be. Remind yourself, and your family, of your long-term plan and don’t get distracted by shiny things. Of course, you should reward yourself and budget for certain things, but don’t use your investment dollars to pay for a lifestyle you can’t afford.