Steps To Be Rich In 5 Years
Getting rich quick wouldn’t work in most instances unless you win a lottery or receive a large inheritance. However, if you are trying to build your own wealth, if it sounds too good to be true, then it is probably. If you want to build real and sustainable wealth, then it’s necessary to have a concrete plan with defined steps. And oh yes, you must follow through on those steps to be rich whiles it guides you in building your wealth. It’s not enough to have a goal of wanting to be rich with no specific steps to be rich, perhaps help you achieve your goals. Sadly, you won’t be able to move forward not to talk of building sustainable wealth or even “worse” you may move backward.
Steps To Be Rich In 5 Years
Thankfully, talkfinance24 has provided best tips for building wealth, which you can convert into actionable steps to be rich. It however depends on how you define those steps to be rich, you may not be -rich- in five years, but you can certainly set yourself up for success and be well on your way to building sustainable wealth.
Building Your Wealth In 5 Years(Steps To Be Rich)
1. Know Where Your Money is Going
The first step of any successful financial plan is to know where your money is going. If you don’t know where your money is going, it will be difficult to put it to better use. This step would typically involve setting up a budget but needn’t that, but Categorizing your spending items. Establishing Owe, Grow, Give and Live categories (don’t worry I will explain).
Owe counts mortgage/rent, student debt, credit cards(loans), taxes (income, property) and others, these are non discretionary debt.
The Grow category covers your long-term and short-term savings.
Give category is the amount you give to charity or help others and then Live is should be a category covering everything else including your more discretionary expenses. Now allocate a certain percentage of your money to each category; for instance 25%- Owe, 10%-Grow, 5%-Give, 60%-Live. You should adapt those percentages to how you spend your money, but note that each category is equally important.
2. Educate Yourself Financially.
Arguably, something that’s not discussed enough is the degree to which formal education and training in finance lack. Everyone needs to know how to manage their money, but many people have to learn the hard way, only after finding themselves in dangerous financial situations. Many things are taught in schools and you probably might have learnt a lot. But they do not educate you on how to become financially independent in life.
On various aspects of finance, studying from steps to be rich, obtain a good credit score and interpret profit and loss statements. You can study money in different ways, the first and most important thing is to read financial books, there are hundreds of good books written by millionaires, billionaires and successful leaders will teach you greatly about money and steps to be rich.
3. Pay All Your Debt
You now know where your money is going, your next steps to be rich is to aggressively pay all debt. Debt simply weighs people down and doesn’t provide a forwarding benefit. How smart it is, rich people borrow money only if there is an opportunity to earn more than they will owe on the debt.
Buying the latest smartphone with a borrowed money or credit card wouldn’t provide a monetary return. Hence, if you have this sort of “dead weight” debt, working on this, your Owe category.
Reduce your interest rate by refinancing your mortgage, stop up credit cards usage and spend intentionally. Add those reduced “Owe” amount to your “Grow” amount.
4. Get Multiple Sources Of Income
Mainstream approach to covering your expenses is to find a job, that’s a single source of income. But that is rarely in the case of those who are able to build serious wealth. Getting multiple sources of income do not only raise the amount you can earn but also eradicates the risk that you will lose all of your income if you lose your job. Many millionaires have numerous sources of income. That’s the ultimate steps to be rich! When one flow of income is interrupted, you still have other streams flowing in to keep you rolling. You never have to rely on a single source of income to build wealth.
5. Increase Your “Grow” Category
It’s time to start building your wealth once you have worked on the initial categories. It goes back to the categories aforementioned with the “Grow” arena. Increasing the percentage you pay into a company shares or investing in bonds and stock markets are great ways to make it happen. As your income grows, put half towards your “Grow” percentage and use the remaining half. This will give you double benefits, you are building your retirement nest egg and more importantly you are reducing your spending.
Also, increase your “Grow” category by committing a percentage of every extra payment to savings. By this way, the earlier you invest, the more you get compound interest.
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