3 Essential Investing Virtues for Wealth Building
And the moral of the story is, discipline. This could be the answer to many questions in life, but not at the same level of gravity as to when it concerns building wealth. One might add “patience” and “wisdom” as well as it seems these three characteristics are synergistically linked together. These are the titans that empower smart investors to turn straw into gold, pennies into dollars, and modesty into wealth.
There is no such thing as “think and grow rich.” Many people think about it and do little to make it happen.
Let’s say you make $30,000 a year beginning at age 22 and get a 2% increase every year over 45 years of employment -- you should be making around $74,000 when you retire. If you invest $450 a month on average for those 45 years with a modest return of 5% you will have nearly one million dollars earned through savings and investment, with nearly $700,000 of that being interest. Did that seem painful? to
I can hear the following refrain coming from many people -- “I can’t afford to set that much aside on a monthly basis! I have rent or a mortgage, a family to feed, 2 cars to pay for, vacations, school clothes and supplies, and…” I know, I get it; been there, done that. Except, this excuse is an anxious cry from the flesh and not the brain. It is amazing what people are able to accomplish when they are committed to discipline, patience, and wisdom. Many investment articles talk about which financial investments to get into -- not this one. It is written to address a few mental ways those who are asleep may employ to wake up from their slumber of excuses and get on track to change their lives, work for a prosperous future, and build wealth.
Disciplined InvestingDiscipline may be a scary word to you. Perhaps it brings back bad memories of boot camp, a hyper-strict parent, a bad relationship, or gym memberships that went unused after a few weeks after pulling a few muscles while trying to get back into shape. For many people, “discipline” is an atrophied characteristic when it comes to saving money and investing. Many say to themselves that once they start making some good money they will be able to save more, some even thinking, save aggressively, but when the pay raises come the lifestyle adjusts and grows with the increase.
The reality is, we are disciplined for what we really want, just as we make time for the things we love.
The beginning of wealth building discipline begins with a glance into your future and imagining yourself in two scenarios:
- If you continued to save and invest like you are now, how long will you have to keep working, and what will the quality of your life be after 50, and will you be financially challenged looking back at all the missed opportunities to be disciplined with your money as you struggle trying to pay bills and keep up with inflation? or,
- Will you proudly look back on the small sacrifices you and your family made over the years that allowed you to build wealth, stay out of debt, and have a relaxed future as you work towards and enter into retirement, knowing bills won’t likely be an issue, and you will be able to leave something for your children?
Here are some disciplines you can integrate into your lifestyle as you mature your relationship with money:
- Spend less than you earn – Save at a minimum of 5% a month from your take home pay, though, if possible, and single, save up to 20%. Consider this money untouchable, though it is suggested you build a reserve of at least equal to 6-12 months worth of wages that can be accessed in case of an emergency. As you spend less, it is suggested you use coupons when grocery shopping.
- Coupons and Sales - A family of four can save up to $2,000 a year on food costs simply using coupons, which can be found in mailers, Sunday paper’s and on many online coupon websites. Use store-brand items. Wear your clothes a little longer and don’t be a slave to fashion; plus, buy your clothes on sale. Do more walking and have only one family car if possible. Do most errands at once instead of multiple trips as this will help you save on gas. Modify vacations, cancel gym memberships and work out at home.
Patient InvestingThe Stock Market and other investment charts often look like a heart monitor reading with lines spiking up and down like that of a sprinter after a race. When looking at these over a short period of time it is easy to be a little fearful of engaging and just trusting one’s money to a simple savings account. Or, you may think you are sophisticated enough to jump in and be a day trader. Neither option is wise for most folks, especially you want to build wealth.
Building wealth take not only discipline, but patience as the vicissitudes of the market and other investment options can change from one day to the other, either gaining, remaining, or losing money. Each breath should not be bated wondering if you have either struck it rich or have lost your nest egg. Many financial advisors suggest to their clients that they ignore the markets and investments except once a month when their statement comes in. This way they will not be overly consumed with their money and have their emotions affected too much either way. Think long-term. Of course, you may need to make adjustments in your portfolio along the way, so review your finances every 6 months to a year with your financial counselor. But be patient and think long-term.
Wise InvestingThe first thing that needs to be cautioned here is to avoid anything that sounds too good to be true or is about getting rich quickly. Employ the two characteristics above to make wise investments. Anyone can fall for a Ponzi scheme and too-good-to-be-true investments if they suspend wisdom and are drawn in by the allure of something that may appeal to that hidden component of greed in us, as we found out with the Bernie Madoff fiasco. Promised returns of 20% or more, double-your-money deals, or anything guaranteed without being written down, should set off alarms in your head and cause you to flee from the opportunity.
Also, do not allow yourself to be pressured into buying any stocks, bonds, pieces of a company, or investments of any kind in anything. Take time to review what is being offered. If you are prepared to make a sound decision one way or another, then do so, but do not allow yourself to be pushed into giving your money to someone or some company without doing your due diligence.
Hire a (CFP) to help you manage your money, identify risks and opportunities, and help you build wealth. Their job is to spend time doing what most of us do not have time to do -- research the markets and business opportunities that exist globally as well as identify those to stay away from. They will be as aggressive or as conservative as you need them to be. But when hiring a CFP, be sure to know their track record, see if they have any issues with the SEC or the state’s attorney general, and what their track record has been like over the last ten years.
ClosingBuilding wealth takes three things: discipline, patience, and wisdom. Make the sacrifices for a better future, wait for your money to grow, and invest wisely using a wealth management company to help you navigate the sometimes treacherous waters of investing.
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