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While we learn things like budgeting, balancing our checkbook and paying our mortgage, the idea of creating wealth eludes many of us.
For those who are serious about improving our finances and truly wish to accumulate real, long-term wealth, one of the first things we need to do is change habits and attitudes. Most of us procrastinate when it comes to saving and are not taught how to plan or set goals. Overcoming one’s fear of the stock market and to reverse generations of bad financial habits and misunderstandings can be a big step as one’s attitude has a lot to do with how one approaches money and investing. For many, taking advantages of the numerous opportunities available is a matter of breaking old habits. It does not have to be difficult. Therefore, the first step is to write down on your calendar, one hour a week to focus and learn about everything financial, including, saving, investing and building net worth. Here are a few other steps you can take:
Outlining your current financial life is also important. Learn how much of your income is coming in against how much is going out of your household. After that look ahead and decide how much you’d like to be earning/saving five, ten and 20 years in the future. The three other basic goals are to eliminate debt, save more and be patient. Making your money work for you is almost as important as actually earning it. While it can take a few years to see significant results from these habits it’s more sensible than trying to get rich quickly or not trying at all.
Most of us don’t want to go through this process. We want to get rich quickly and unfortunately fail at this approach 99 percent of the time. If you have a die-hard “buy cheap” mentality created by a lifetime of hearing “traditional wisdom,” then you will always think cheap and safe, plus you may have missed some valuable opportunities.
When it comes to wealth building, there can be four parts to your foundation: real estate, equity investments, i.e. the stock market, Internal Revenue Service-approved retirement funds and business equity. If you need help with this, consider assembling a professional financial team. This can include realtors, technology and business consultants, such as accountants and a financial advisor to help guide you. For those who may feel this is too risky or expensive, consider that trying to save$1,000 by avoiding a consultant’s fee could cost more in missed opportunities depending on the value of the advice they provide.
Salaried workers should probably be in their company’s defined-benefit or defined-contribution plan, which helps one save for retirement on a tax-deferred basis. Those working for a non-profit institution can use a 403(b). If you're self-employed or own a small business, you're probably hurting your own financial future if you’ve not opened a Simplified Employee Pension (SEP) and/or an Individual Retirement Account (IRA) plan. These are relatively easy and inexpensive to administer. An individual or solo 401(k) can also provide a good combination of benefits for the self-employed.