Have you ever wanted to be rich? Many would like to learn how to accumulate wealth, but the truth is many are unsure how. But there is a simple method that has proven to work for many people. This is to save money and use that to invest over the long term. Many are put off by learning how to do this as they assume it is quite complicated and only a few know how. But the steps are quite simple, and anyone can learn them. This is what Ramit Sethi explains in his book “I will teach you to be rich”. So, what exactly can we learn from this book?
Take accountability for your financial situation
Let’s be honest, we have all felt some guilt at some point about not saving enough money. The starting point for any wealth journey has to be for the person to actually take responsibility and begin to save. It’s time to stop making excuses. Unless you are living in actual poverty, there are ways to take ownership of your financial situation. But it can be so overwhelming given all of the information being blasted at you by the media. One person is telling you that you can cut back on lattes and becoming a millionaire. Another is telling you that investing is too risky. But the truth is, by having a proper budget and making the right choices, you can save money every month and put it to work for you. You just have to choose to do this.
Build your credit score
Many people do not understand the impact of their credit score on their financial lives. A credit card can both build and destroy your credit rating depending on how you use it. But if you had a mortgage, depending on your credit score, a good credit score would save you an extra $70,000 on your mortgage compared to a bad score with a higher interest rate as a result. One of the easiest ways to build your credit score is to pay off your credit card every month, instead of carrying a balance to the next month. But many pay the minimum amount and don’t realise the effect this has on their ability to get a mortgage, loan, or access to other things that would impact their financial lives.
Budget effectively
I bet you have felt guilty about buying something right? You knew you shouldn’t have bought it, you couldn’t really afford it, but you bought it anyway. If this sounds familiar, you need to adopt the concept of conscious sending. Its about reducing the amount of money you spend on things that aren’t important, but instead are just for show. Its about sitting down and working out your actual priorities and allocating your money accordingly. If your plan is to pay off the mortgage in 5 years, does it make sense to stay in the 5-star hotel, instead of the 3-star hotel when you are on holiday? Do you need to buy that branded pair of jeans when another pair would be a fraction of the cost? By making smart choices in the short term, you put yourself on the path to long term financial freedom, but it takes discipline to do this.
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Lee Nallalingham 