I’m sharing 3 not-so secrets to building wealth. These are the things to do to start where you are and end up with solid retirement savings that you can live on and wealth that you can pass down from generation to generation.
I’m sharing these not-so-secrets to building wealth. The wealthy don’t have “secrets”. They follow common sense savings plans, set investing goals, and live carefully and intentionally throughout their lives.
The first thing to do is to paint wealth in a positive light in your mind & set becoming wealthy as a goal. Set Wealth as a Goal… and see Wealth as a Blessing (not something negative or greedy).
Here’s the thing about building wealth… sometimes when we think about becoming wildly wealthy, succeeding at paying off debt and setting ourselves up to live comfortably in retirement, to send our children to college, to help them start their lives, and to grow this big and plentiful neset egg… we feel like doing those things and building wealth is a bad thing.
We’ve been conditioned by society to believe that rich people are evil and even that desiring to be wealthy is seen in that same light. Let me clear this up for you… building wealth isn’t evil. Wanting to take care of yourself, your family, your community and the world isn’t evil. You know that you are a person who is kind and generous. You are hardworking. You are deserving of every success, every blessing, every accomplishment and milestone. You are worthy of wealth. If you hang around me long enough you will hear me say that over and over again. You are worthy of success. You are able to make progress and to save, invest and create the future and the life of your dreams.
Desiring to be wealthy means that you want to have a greater impact for good. It means that you want to change your family tree. It means that you want to write a new legacy for your family, create and model a new and positive relationship with money, and change your family tree altogether. It means that you want to be able to give generously to causes that are close to your heart. It means that you want to make the world a better place. It means that you are ready to build a life of less stress and more balance than the one you are living now. It means that you can come to believe that you are great at making decisions in the little and the big things!
Financial independence – to me that means the ability to make choices based on what is best for myself, my sanity, health and our family. It’s the ability to not live in fear because of money, making bills, being in debt, or worrying about keeping a roof over our heads.
The textbook definition of financial independence is having enough money in investments and growth from those investments that you never have to work again or be dependent on an income or someone else to take care of you. Breathe that in for a moment. How would that feel? What would your life look like? What would you do on a daily basis if that were true for you? How much peace and calm would exist in your heart if you never had to worry about bills, debt, or payments ever again?
Building wealth isn’t simply about the accumulation of money or things, it’s about building a life with freedom and flexibility. Building wealth isn’t about greed or consumerism, it’s about reminding yourself what’s most important and creating a life where you get to do those things.
If you are in partnership, dreaming of wealth and planning for how to go about the business of creating that freedom are conversations that you should be having with your partner. Use this episode as a reminder to sit down and dream together. Paint a clear picture of a life in the future that you can both get excited about! Talk about it often. Create a shared dream and language that helps to you relate to each other and remember the reason that you are striving for that life. Find something you are both excited to strive for… and then get about the business of creating that life for yourselves!
So the first secret is seeing building wealth as a positive thing and making it a goal of yours (and your spouses if you are in partnership). The second thing is to live on less than you make.
Live on Less than you Make. Yep. Living on less than you make every single month.
Yes, I know… it’s not the sexiest of advice and truly it’s not meant to be. Living within your means is the one way to make real progress.
Living on less dollars than you make each and every month is so so important. It’s the most important factor in making traction towards creating a life that you love, achieving your short and long term financial goals.
What can you do if you live on less than you make?
- If you live on less than you make… you can get out of debt.
- If you live on less than you make… you can save money for purchases.
- If you live on less than you make… you can invest wisely for your future.
- If you live on less than you make… you can change your family tree.
- If you live on less than you make… you can live generously and share your blessings with others.
- If you live on less than you make… you can travel and see the world.
- If you live on less than you make… fill in the blank.
Truly, if you can get control of your lifestyle and keep it below what you are earning, you can do limitless things with your money.
Here’s how to live on less than you make:
Budget. Budget. Budget.
You need a budget.
Budgets can give you the freedom to spend money on things that are important to you while still allowing you to make progress towards your financial goals.
Successful budgets are RAW – they are realistic, agreed upon, and in writing. If you’d like to hear more about budgeting, check out Episode 31. It’s a deeper dive into budgeting, the characteristics of a successful budget and how to implement a budget into your life.
You will not become wealthy if you do not understand and adopt the habit of living on less than you make. You can do this through the use of a budget, by increasing your income or by decreasing your lifestyle, if that’s something you need to do.
You cannot do it by increasing your income alone… because what tends to happen there is up goes your income and, because you don’t have a budget and you aren’t intentionally controlling your spending… up goes your lifestyle. This will happen each time you get a raise and increase the money coming in unless you intentionally make sure you aren’t spending all of your income.
Understand Investing… and do it… consistently.
The third “Secret” to becoming wealthy is to understand investing and to do it consistently. The first place to be saving is in tax-sheltered retirement accounts like your 401k or 403b at work. The next option is to take advantage of a back-door Roth – it’s an IRA that you fund on your own with after tax dollar and then roll into Roth status. At the time of this recording the federal limit is $6,000 per year for the IRA to Roth Rollover amount and it can be done in addition to or regardless of your 401k/403b contributions.
Here’s another thing to consider – these accounts have limits and penalties on when you are able to withdraw money, at what age and how much you can take as a distribution.
All of this to say – it’s wise to create space to invest outside of retirement. Investing in the market in accounts that are index funds, mirror the market, and have a relatively low turnover rate is going to allow you to be fully in control and withdraw money when you are ready, not when laws dictate “retirement age” and allow for distributions of retirement accounts.
Here’s the thing about investing: It’s not hard. It seems complicated at first but there are so many resources out there and that, too, can feel overwhelming.
Here’s what you need to know:
Time in the market is more important than timing the market. Timing the market is trying to expend energy predicting the market. It’s “buy low, sell high” and it’s high risk, high stress, and not proven to generate more money in the long term than consistently buying and holding investments as they grow. Time in the market is investing regularly, month-by-month, year-by-year, and working with a trusted financial advisor on how to invest that money. Studies have shown that being consistent with investing is more important than the percentage, the amount or even what it’s invested in. The biggest part is doing the darn thing and starting to make investing automatic, something that happens monthly, and then not stopping.
The more automated, the better.
Having money drafted automatically from your check before you bring it home or automatically funding accounts by scheduling automatic drafts can help you be consistent. Even the best of us miss months from time-to-time, but this makes the investing friction proof. It eliminates the resistance and it makes it impossible for you to accidentally spend that money at TJMaxx, because it never lands in your account.
Don’t try to time the market.
Investing consistently month-after-month is going to create an averaging affect. Sometimes the market might be higher or lower on the particular day that your money goes in, and this will average out. It’s better to invest consistently than sporadically because you are trying to time things perfectly.