How To Be Wealthy Slowly But Surely
Investing Safely, Money Basics

How To Be Wealthy Slowly But Surely

In the previous article – “Rich or Wealthy, Which is Better“, we saw that Wealth is measured in time, i.e. the more money you have, the more time it will last at a given rate of spending.

So is there a way that we can work for our money once, build our wealth and get paid forever?

Make Money Work For You

This was the question asked to me by a young man starting out in his career. He was around 25 years old when he met me, and was just starting to realise that he needs his money to work for him, rather than work for money forever.

My answer was of course, Yes.

Because there is a way to Create a Second Income through investing as recommended by Robert Kiyosaki and Warren Buffett.

The steps to Accumulate Wealth and Create a Second Income are below:

  1. Accumulate (Save) money, over a period of time by setting yourself clear savings targets.
  2. Once you hit your savings goal, Invest the money to create a second income.

Am I joking, not at all, the process is as simple as it sounds, but it is not easy.

Not easy because you need to be committed to the goal, and not let yourself be distracted by the easy avenues of spending money around you.

Steps to Accumulate Wealth

Pay Yourself First – Practice Delayed gratification

Everybody (including me sometimes) wants instant gratification today. Many youngsters are living a lifestyle of ‘Living for the moment’, because it is supposedly the ‘Cool thing to do’. They don’t want to look bad in front of their peers if they are seen as being stingy and not spending money. The same is true for most adults I know, who are living paycheck to paycheck, driving expensive cars, living in lavish houses, but having no savings at the end of the month.

These people are a ‘Financial disaster – waiting to happen’, where a simple issue like a job loss or health issue that stops them from working could ruin their finances completely.

Have you been in this situation? I know, I have.

I made some changes in my finances, after realising the problem. Today, I have no debts and a significant amount of savings. I still drive a decent car, I still live in a modest home, and don’t sacrifice on my lifestyle in a big way.

I just ‘Pay myself first’ and then spend the rest.

If You Find Yourself In A Hole – STOP DIGGING

This is a statement, I read online. In The Bankers Magazine, it was published in 1964 as: “Let me tell you about the law of holes: If you find yourself in a hole, stop digging.” The part after the colon in that version has also been attributed to American humorist Will Rogers.

This part is relevant to your Debt situation. If you have a lot of Debts, stop accumulating more. Do yourself a favour and cut down on your debts. There are different types of Debt. You can follow the steps in this Debt Consolidation Guide to get yourself out of debt faster.

Decide On An Amount To Save Each Month

The ideal amount to Save Each Month should ideally be atleast 10% of you income. If you can do more, you are a champ.

Just make sure that the amount you plan to save each month should not be too small or too big, it should be something you can afford to put aside consistently.

Start a Regular Savings Plan

I know, you have heard this before, from many people, mostly financial advisors, but it is common sense, isn’t it?

I mean you can save the money in a bank if you wanted to, but that would hardly beat inflation, and it would take ages before you save a meaningful amount, because your money would not be working for you, it would only be working for the bank.

You need to get your money working for you, even when you are saving it.

But don’t go with what I am saying, just because I am a financial advisor, let some logic prevail.

If you need let’s say USD 350,000 in 15 years to buy a house for example,

…you would need to put aside (350,000/12/5) = USD 1,944 per month in the bank.

If you were to use a regular savings plan, to achieve the same figure,

…you would need to put aside USD 995 per month in the savings plan (at an assumed growth rate of 8% p.a. compounded over 15 years)

That’s a saving of almost 50% where you could spend the difference or even invest it.

The choice is simple. Start saving now to accumulate wealth.

Read the next article in the series…

How To Invest Money Safely

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Rich or Wealthy - Which is Better
Investing Safely

Rich or Wealthy, Which is Better?

Why being wealthy is different (and better) than being rich

Many people think that being Rich and being Wealthy are the same thing. But there is a difference between the two: The rich have lots of money but the wealthy don’t worry about money. - Robert Kiyosaki (Author of 'Rich Dad Poor Dad').

The 'Rich' might have lots of money, but they also might have lots of expenses that keep them up at night. Or they might have a high paying job but have to get up to work everyday and have fear of getting fired or laid off.

The 'Wealthy' on the other hand, don't have these worries, Why? What's the difference? 

The Definition Of Wealth

The definition of wealth is the number of days you can survive without physically working (or anyone in your household physically working) and still maintain your standard of living.

For example, if your monthly expenses are $5,000 and you have $20,000 in savings, your wealth is approximately four months or 120 days. After that you are broke.

Wealth is measured in time, not in dollars.

The Difference Between Being Rich and Wealthy

In short, the difference between 'Being Rich' and 'Being Wealthy', is 'The Wealthy' have a source of income apart from their 'Day Job', or 'Business', that is greater than their 'Monthly expenses'.

It's Not What You Make...

Ultimately, it’s not how much money you make that matters but how much money you keep—and how long that money works for you. - Robert Kiyosaki (Author of 'Rich Dad Poor Dad')

As an Independent Financial Advisor, I meet many people who make a lot of money, but (for many of them), all their money goes out of their expense column. Every time they make a little more money, they go shopping. They often buy a bigger house or a new car, which results in long-term debt and more hard work. Nothing is left to go into the asset column. It’s this kind of behavior that separates the rich from the wealthy.

There is nothing wrong in liking the finer things in life.

The difference is the 'Wealthy' don’t have to work to purchase them, or go into deep debt. Rather, they spent the time necessary to be smart with their money, work hard, and build investments that provide enough cash flow each month to cover their expenses—including fun liabilities like cars and houses.

They don’t work for their money. Money works for them.

Lots of people can become rich. But only financially intelligent people can become wealthy—and that takes a strong financial education that allows you to build cash-flowing investments and assets.

Read the next article in this series -

How To Be Wealthy - Slowly, But Surely

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