Financial education. Arguably one of the most important topics in today’s financially-dependent world, yet it’s something that most people never really learn. Or worse, they learn it the hard way. So today (in a few minutes really), you will be one major step closer towards the financial freedom that we all crave because YOU were alpha enough to learn about it.
What is Wealth ?
Wealth is a measure of the value of assets owned by an individual. So an individual’s net worth would be the value of assets minus the debt/liabilities and can be shown as follows:
Net Worth = Assets – Liabilities
But Alpha, what the heck are assets and liabilities? That’s a great question Billy. While there are a couple of ways to describe them, simply put, assets are things of value that essentially put money in your pocket, whereas liabilities ultimately take money out of your pocket. Here are a couple examples:
As you can see, liabilities can really put a dent in your wallet. So naturally we want to eliminate the liabilities so we can accumulate as much assets that generate income for us.
So How Do I Become Wealthy ?
STEP #1 – Get Rid of Debt
You’re going to want to eliminate your debt as soon as possible. I know it can be daunting and it may feel like you’ll never get over that interest clawing away at your hard-earned money, but regularly pay off any debts you may have and feel the burden on your shoulders lighten. It’ll out you in a great position to start building your wealth.
STEP #2 – Have a Plan
Failure to prepare is preparing to fail. The wise words of money-man Benjamin Franklin continue to ring true. Have a plan for your goal. That way you’ll know what you need to do to accomplish it. You wanna be a millionaire by 40? 60? 80? 100 years old? You can definitely do it. Figure out how much money you need to save/invest each month to reach your goal. It’ll help automate things and prevent any cheating when you know this much should be saved each month. Prioritize it. Save your money at the beginning of the month, then worry about other expenses you may to incur. This will help you control the expenses to what you have rather than spend everything then worry about saving what’s left
STEP #3 – Build Sources of Income
Assets are the key to building wealth. Accumulate more assets, accumulate more wealth. It really is as simple as that. Though actually accumulating income-generating assets obviously requires some work. If you’ve already cleared off most (or all) of your debt, it’s time to expand your income with other assets. Perhaps you currently have a job with a steady income. Great. You have one source of income. Unfortunately one isn’t really enough anymore to live very comfortably. So use your salary to help acquire other assets like stocks or perhaps a property. Stocks in particular are a pretty great way to start off because it doesn’t require that much money and over time it just grows. Think about all the asset classes and just expand.
STEP #4 – Stick with the Plan
I can’t stress enough the importance of consistency. There may be tricky times where you’ll be tempted to forget about saving for a month or two. It’s not worth it my friend. Set your sights on the big picture of being financially free and not having to worry about money. Live a modest lifestyle initially, minimize your expenses, save/invest regularly and watch your life change one day. You will be thankful for the position you put yourself in.
STEP #5 – Financial Freedom
Be free my friends, be free. I hope that you reach every goal you set for yourself and on that day, you will have the freedom of choice. The choice to retire, the choice to go on an expensive holiday with your Ioved ones, the choice to buy that car you’ve always wanted. You will be grateful for the struggle in the beginning. Just be disciplined. Indulge every now and then but don’t go too crazy alright?
You will be grateful for the struggle in the beginning