Most people want to be rich, but few will achieve it due to their mindsets. If you don’t have the right mindset, the odds are stacked against you to create (and keep) your wealth. Too many people associated the wealthy with having “more toys.” But, it’s not just about the toys that make someone wealthy. It’s about how to grow money and keep it growing indefinitely.
- Use the power of compounding to your advantage.
Suppose you have several dividend-paying stocks. What do you do when you get your dividend payments? If you answered that you do nothing with them or transfer them to your savings, you are leaving money on the table. Reinvest those dividends so they can grow along with the rest of the investment.
- Take a long-term approach to your financial situation.
Don’t get caught up in the game of trying to time the You may succeed on occasion, but the odds are stacked against you. You will give most of those gains back eventually.
- Stay above the rate of inflation.
Too many people ignore inflation, largely because it seems abstract to them. However, it’s quite real, and it will erode your savings. If you make a 1.5% annual return on your savings and the inflation rate is 2%, you are down by 0.5% for the year. You must switch your thinking.
- Taxes are another overly complicated subject that trips many people up.
As such, they ignore the implications of the taxes they end up paying. If you cannot grasp the tax concepts, consider hiring a qualified CPA or tax consultant.
- When you reach a respectable sum of money, never spend the principal.
That is the base to generate further wealth. Many people who win the lottery end up broke because they violate this simple rule.
- Create a financial plan.
This is a broad concept which is why people have a difficult time creating one. But, when you take the plunge and create a financial plan, you have something to measure. If you are stuck, consider hiring a qualified professional to help you.
- Take time to evaluate your investments.
You shouldn’t glue your eyes to a trading terminal on a daily basis. But, you should evaluate your investments periodically. You want to weed the bad investments and make the good investments flourish.
- It will be almost impossible to earn respectable gains with your investments when you are heavily in debt.
This doesn’t include your mortgage as that is financed at one of the best rates you will find. Credit card debt and other revolving debt will eliminate your gains. Investing while in debt is also increasing your risk should those investments turn sour.