Basics: 3 Action Cycles to Start Creating Wealth. It’s not rocket science, but it’s a straightforward process. These actionable strategies only require you and some time, and you can start from any wealth level. Even the “miserable wealth” level. 🙂
If you’re miserable about not being wealthy, there are usually 3 actions you haven’t taken. Get these three things done and moving and you’ll likely stop being miserable and start getting wealthier.
Action Step 1: Define your wealth goal immediately
Define what being wealthy is for you. “Having more than now” is not a suitable definition because finding 20 cents on the pavement will meet that criteria, yet it doesn’t transform your life.
In Richard Templar’s book The Rules of Wealth, he shared how a friend defined being wealthy as when he could live off the interest earned from the interest earned on his earned stash. So his stash earns interest, and the interest earned on the interest needs to fund his lifestyle. Interesting.
That will take a while to get there. Perhaps to start with, let’s define you as wealthy, financially-speaking, when your investments earn more than you do now. That would mean you don’t have to work at what what you’re doing now if you don’t want to.
So write down that figure if you like and start with that. Your investments will need to generate that number. Note, if you’re currently living in squalor, perhaps increase the number a bit.
Anyway, whatever your definition, you’re going to need some investments that generate income or will significantly increase in value.
Action Cycle 2: Create your Investment Deposit
To get some investments you’re going to have to save some money to take ownership of the investment. To save money, you’re going to have to earn more than you spend and save the difference. While the savings are accumulating to an amount capable of buying something, it can be working for you either earning interest or in lower cost-of-entry investment like the stock market.
Note, if you don’t know what you’re doing in the stock market, buy an ETF managed by someone who does know what they are doing.
Also note, if your best friend Mickey – who has never invested before in his life – is all excited about how he is now investing in the stock market and swears by some stocks, it probably means the market is at the point of the bubble that has attracted the anybodys, and it’s about to collapse. Not a good time to get in. If that’s the case, find another vehicle that you can put your savings in that will earn you at least 5% a year in interest. Maybe it’ll be some sort of fixed-term deposity thing. Maybe some other bonus savings account.
Keep adding to it every payday. And it’ll grow itself a little too with the whole interest thing. Then when it gets big enough to do the something that you want to do, it’s time to take Action Step 3.
Action Play 3: Take ownership
Now you’ve got enough money to invest in something, find an income-generating investment. All you need is enough to take ownership of the investment, like a deposit. You can borrow the rest so long as the income generated is greater than your loan repayment. That’s because you need the income to save to buy more investments. The appreciation on the underlying value of the investment is lovely, but not if you can’t pay your bills because of the new loan.
Remember, any investment needs to be generating income or appreciating in value faster than other investments so it can be sold for more cash. But go for income first so you can use it to repeat step 2 and 3 a few times.
The great thing about this fairly straightforward plan is: once you are clear about the goal and the next simple steps, and you find some investments that can deliver, you realise that it’s possible. That realisation will get you excited. That excited stops you feeling miserable, and that’s because even though your immediate wealth hasn’t changed, you are able to take immediate steps to change that wealth status. In other words, you can immediately start taking action to reach your definition of wealthy!
Actually you already know the rules to this game. It’s Monopoly. Start with Old Kent Road and grow to Mayfair, or Boardwalk or whatever the goal is.
NOW: Just start playing.
- Write down the amount that your future investment portfolio needs to pay you each month to either replace your current lifestyle or to create your desired lifestyle.
- Check out the income generated from a bunch of different types of investments. The two simplest ones are property and the stock market. Look at rental returns on property and what downpayment you’re going to need including all the associated fees. And look at the dividends (income) or growth of shares or managed funds or ETFs (Exchange-Traded Funds) in the stock market at home or overseas.
- Start your portfolio. Save up $500 and go and buy some shares. You can usually set up an account with your bank and do it all online. Then do it again and again until you have enough to put it somewhere else if you wish.
It’s just important to start, and then critical to keep going. It would have been great if you’d have started this ten years ago (and kept going), but the future you of ten years from now can be a heck of a lot happier because you are choosing to start this now and keep it going. Good for you.