“The best way to accumulate wealth is to get yourself a good financial advisor”. Well folks, that’s some gold standard bullshit right there. I’m a big believer in bell curves, so unless you get a very reliable recommendation, you have a 50% chance of landing yourself an advisor that is below average. It’s your money — you need much better than average! It’s your money, so you must take control of the wheel yourself. It’s far too important to leave it up to someone else. And over a lifetime, you will save a lot of extra money if you control your own finances.
If you’re relatively young or still feel you have a few decent years ahead of you, and you’re working and able to have some spare cash in the grand wash-up, then I hope to offer some advice that can help you accumulate wealth. Here are some tips from an average idiot like me for building wealth.
Technology Is Your Friend
Technology has rendered a lot of financial advisors useless. Everything that was difficult which they used to do for you, is now easy for anyone with half a brain and sufficient motivation to do. Motivation is key. Like anything, you have to want to build wealth and make some sacrifices to do it. If you are not motivated, then don’t bother reading any further. There are lots of companies that give you access to lots of different financial offerings. It’s become very easy to buy very small parcels of shares and not be ripped off with brokerage fees. You can invest in things like ETFs or Index Funds. All these things used to be difficult and handled by a financial advisor. But for the average jo-blo who is working and just wants to invest a little bit at regular intervals, then you do not need these guys anymore. Most of them are biased and offer poor service and just “clip the ticket” from what you give them. They have their place — for more complicated financial scenarios like setting up retirement funding or business strategy and the like. But not for the average wage-earner. The companies that offer this technology are geared up towards small investors like you. It’s easy to setup an account with them and make regular investments.
Start Young
Start as young as you can. It’s never too early. When you’re young, you might have little free cash, but any money invested properly over a long time period makes a big difference to the end result. It also helps you form good spending habits. You avoid buying crap you don’t need and wasting money on stupid stuff like coffee and take-aways. You don’t want to be the person looking back saying “I really don’t know where all my money went”. You want to be sitting quietly one day saying to yourself, “holy-crap, at this rate, things are going to wind up pretty good for me”.
Be Regular
Be regular — try to save and invest at regular intervals. It should be like clockwork. No “do I or don’t I this month”. Good saving is regular and boring. Most people don’t like boring stuff. But you’ll be the one doing nice things with your piles of cash later in life.
Obviously you don’t want to invest every spare cent you have on a long term basis. You don’t need to make your life miserable. As long as you putting something regularly towards the long term, that’s the key. You can also save money for short term purposes — holidays, cars, etc.
Know Your Limitations
You are not an investment guru. Just because you are “in the market” doesn’t mean you have any clue about financial markets or economics! Big financial entities are able to push and pull lots of levers, so don’t think you can outsmart them. Sometimes you might get lucky but most times you won’t. So, what you want to do is accept that you know bugger-all. Invest in things that are low-cost and low-risk over the long term. Something like an S&P 500 Index ETF. I will write further articles that go into specifics a bit more. But for now, just think of investing in the most boring thing that requires zero thought or effort from you. This takes away stress from decision making and frees up time for more enjoyable things or other ways of making money. Like having a You-Tube channel or running a blog. Once you have built some wealth, if you find that investment and finance is something you enjoy, you could always put aside a very small portion as “play-money”.
Avoid Lazy Money
That’s money sitting around in bank accounts getting next to no interest. Try to earn at least some income from that money. Generally, people have vast amounts of lazy money and over a lifetime, this also makes a big difference to your wealth. Put spare cash in higher interest accounts, short-term deposits (3/6/12 months), etc. Or find an account that calculates interest on a daily basis so that you can move money in and out of that account as required. Over a lifetime, that will add up to thousands of extra dollars.
Think Years Not Days
Accumulating wealth is a long term game. There will be ups and downs. If you are doing things the right way, you can ignore the vagaries of the financial markets and have complete confidence that over a long period of time you will accumulate decent wealth and do so much better than most of the saps who just have their money sitting around in bank accounts.
Teach Your Kids
If you have children, try to impart this wisdom and strategy to them. You want your kids to be independent and financially strong rather than being a financial parasite. They should believe that nothing just comes to you — it is entirely up to you.
A Summary
- Start young
- DIY. Be boring and regular.
- Stop wasting money on useless crap.
- Avoid “lazy money”.
- You have no real idea about financial markets and products — invest accordingly.
- Learn as you go.
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