Let’s face it, unless you win the lottery, receive a large inheritance or are fortunate enough to bring your own product to market, most people will simply have to go from rags to riches the old fashioned way – spending less, saving more and investing for the future. And while this may sound simple enough, very few are able to follow this simple plan. The reasons vary, of course, everything from low earnings, over spending, not taking advantage of apparent opportunities or the circumstances of life got in the way, but most people can slowly build wealth over time if they follow a few simple steps.
Monitor your spending. Unless you know exactly how your hard earned dollars are being spent you’ll never be able to determine if you’re spending your money wisely. The only tool at your disposal that will chart your spending habits is your budget. I can’t emphasis this enough! By planning your budget for the long-term, you’ll be able to better gage spending and take better control of your personal economy.
Make credit work for you. As consumers, most of us used credit not to build wealth but rather to supplement our income. As such, credit card debt skyrocketed over the last decade for the average middle-class household. However, today’s consumers are starting to get smarter about using credit as credit card debt is down since 2012. The best way to make credit work for you is to only buy routine household items you can afford using your credit card and paying off the balance in full immediately when the bill comes due. It’s clear that irresponsible use of credit is the leading cause of credit card debt. So, use that plastic source for short-term “loans” wisely.
Invest wisely. While most consumers would love to find that one stock buy that will make them rich, few people have the disposable income to make a big-time investment that stands to eventually make them millions. So, what’s a person of modest means to do if they want to get involved in the stock market? The answer is “move slowly, build up your cash infusion through savings, study industry trends, then invest wisely.” Unless you get extremely lucky and happen to put your money in a hot stock of the moment, most investors invest for the long haul through value investing. But to get there takes time and patience. In the beginning, you’ll have to take baby-steps to investing which means putting money into savings first and learning how stock trading works, but after you’ve dipped your feet in the financial water and gained experience you can take bolder moves as your earnings begin to accrue. An alternative actively trading on the stock exchange is to start a monthly stock purchasing plan with a reputable broker where installment payments are set aside until the full amount is accumulated to buy a share of stock. It’s a slow process, but at least you’ll be able to get your feet wet in the stock market and build your investment income over time.
That’s my blogpost for this week. Join the discussion and post your comments below. And don’t forget to tune in next week where I’ll once again share more ways you can break the debt cycle and then go…beyond.
Zebert L. Brown is the author of Break the Debt Cycle in 3 Simple Steps and a 16 year Navy veteran with specialties in administrative management, career development and public relations. Follow him on Facebook and Twitter.