Here are the 7 steps to how to become wealthy:
1. Calculate your starting point
Until you calculate a starting point you have no way of knowing whether you’ve improved your wealth or by how much.
So work out the value of everything you own, (your house, car, investments, pensions etc) and deduct the value of everything you owe (your mortgage, credit card balances, HP etc.). The difference is your net worth. Set a target for what you want this to increase to over the next 6 months or 12 months
2. Control your debt
If you have large balances on your credit card and only pay off the minimum each month you are paying a huge amount of interest.
If you only pay off the minimum balance each month it could take 47 years to repay your balance and cost 3-4 times the initial balance. So before you put a purchase on your credit card consider how much it will cost you to pay it back in total, rather than how much you pay back each month.
3. Save before you spend
Don’t plan to save what balance you have left in your bank account at the end of the month, because invariably there won’t be anything left. Instead have a standing order each month that goes out of your account as soon as your income comes in. That way your savings will be taken care of.
Over time it will be easier to increase the amount of the standing order, as you see your savings grow.
4. Save regularly even if it’s only a small amount
It’s easy to think that a small amount isn’t worth saving, but over the long term you’d be surprised how much it can grow. For example, if you were to invest your child benefit from the day your child is born until they are aged 18 and get a 10% return, at the age of 18 that would be worth over £53,000.
Enough to fund university, provide a deposit on a property, fund a gap year etc. However, if instead of giving this sum to your son or daughter at age 18 you left it invested continuing to earn 10% return each year it would be worth over £4.6 Million when they are aged 65.
That’s based on investing £20.30 per week- or £2.90 a day. A similar price to an upmarket cup of coffee!
5. Monitor your spending
If you think you don’t have enough money to save keep a detailed record of all that you spend over a 3 month period- including everything you spend in cash. Then review each item on the list and consider “how can I reduce it?” Is it possible to eat out less often, eat out in a cheaper spot, or have friends round instead of eating out? You may be surprised at where your money’s going, and the options to reduce your costs.
6 Review everything regularly
Doing the above exercises is not a one off. Over time bad habits can creep back in. So do all this on a regular basis to ensure your money is working hard for you.
7. Enjoy your money
Don’t be fearful of dealing with your finances. If you approach each of the exercise with the attitude it won’t work or you’ll hate doing it, then that’s exactly what you’ll get. Follow the steps to improve your financial position in the knowledge that small steps on a regular basis can lead to a significant increase in your wealth