Change How You Think About Money: 5 Things You Can Do To Become Wealthy
How do you define wealth? Some define wealth as having a lot of money and possessions. But consider this definition: “wealth is the difference between what you earn and what you spend”.
In 2015 the National Bureau of Economic Research estimated about 15 percent of NFL players go bankrupt within 12 years of hanging up their jerseys. Why does this happen? Generally speaking, the problem is usually a lack of financial management skills. If you don’t know how to manage money, it won’t matter how much you have. Your habits contribute to your financial success or failure.
If you’re not financially savvy and you suddenly come into money, the temptation is to increase your spending in direct proportion. That’s a mistake. Without a sound financial strategy, your new wealth can disappear as quickly as it came. Truly wealthy people have a plan in place to protect the money they have, and more importantly, keep it growing. Rich people have money. Wealthy people know how to keep it.
The good news is, you don’t have to be rich to be smart. If you earn a living wage, you can change your financial habits and create personal wealth. Just follow these steps:
1. Get out of debt: One of the keys to financial success and security involves paying down debt, as well as avoiding future debt. Pay down “bad debt” first, such as credit cards, car loans, and any other loans that have high-interest rates. Some loans can benefit you during this process like refinancing your auto loan to reduce your monthly payments or taking out a low-interest personal loan to consolidate high-interest credit card debt. In fact, you can talk to one of our Financial Consultants who will help you put together a strategic financial plan specific to your needs.
2. Create a budget and live within your means: Look at your monthly spending habits to see where you can cut back. Ideally, only 25% to 35% of your income should go to housing, but there are other budget items to consider. Use this handout as a guideline to create your own budget. Focus on needs versus wants – is a zippy new sports car really worth the hefty price tag when a reliable used car can get you where you need to go for far less? We can all learn from billionaire Warren Buffet, who continues to live in a modest house that is worth a scant .001% of his total wealth.
3. Set financial goals: Spend wisely. Look at every purchase as an investment. The goal is to spend on things you truly care about and have money left over for life’s little (sometimes big) surprises. There is nothing wrong with wanting the latest tech gadget or going on lavish vacations, as long as they fit within your budget. Check out apps like Savings Track to help you set financial goals and stay on track. Fitzsimons Credit Union offers partnership programs to help save and earn money on services you already use like cell phone plans and auto insurance.
4. Invest in the future: Acquire assets with the money you save; look into investments, retirement plans, and healthy savings accounts. Retirement is the biggest investment you can ever make. The earlier you start, the better. Take advantage of employer 401(k) plans, especially if they offer matching contributions. If you are a first-time investor, take a look at these investing apps that can help you dip your toes in the world of investing. Looking for more financial planning expertise? Visit with our in-house financial consultant, Steve Van Sky. He can help you reach your retirement goals or life goals in general.
5. Give back to your community: The mark of a truly wealthy individual is how they give back and treat others. Check out ways you can give back to your local community. There are many fantastic organizations in Aurora, Colorado that are looking for a helping hand.