Last week’s article, Wealth Creation Made Easy, discussed a few time-tested rules to help you achieve significant wealth. The article highlighted three areas – that should you have consistent success in achieving, will provide you with a framework in creating wealth. Let’s take a deeper dive and discuss a few additional thoughts to make following the three rules a bit easier.
Avoid Unproductive Comparisons
We are social creatures, and it’s in our nature to compare our position in life, particularly financial status, to others. While avoiding this trap is nothing new, the advent of social media and unlimited access to our network of friends, family, and acquaintances makes it much more difficult today. Recommendation: Avoid these unproductive comparisons by limiting your time on social media. Instead, focus more on what you are trying to achieve. While social media has many benefits, it is there where the greatest distractions to your goals exist. It’s there where the highlight reels of other people’s lives, i.e., the most recent vacation, the new home, new car, etc. are perfect and front and center.
Develop and Monitor Budgets
Last week we discussed saving early and saving often and how budgeting is key to this endeavor. There are many ways to establish a budget but finding an easy way to monitor that budget can be challenging. The good news is there are many new smartphone applications to help. While I prefer and use Mint, find the program that best helps you accomplish your budgeting goals. Nerd Wallet has a great article on apps that can be used.
Obsess Over the Time Value of Money
The one thing successful savers and investors always have at the forefront of their minds is the time value of money (TVM). TVM is the idea that money now is worth more than the same amount of money in the future due to its earnings potential. See more detail on TVM here. For example, if I save $5,000 today and invest that money assuming an internal rate of return of 8% per year over ten years, I will have $10,795. If I extend this example out to 40 years, I will have $108,623. These are big numbers, right!?!? Recommendation: Approach every purchase you make with TVM in mind. Remember, the cost difference between what you “want” and what you “need” is always greater than it appears. Ask yourself: Is my short-term desire to consume worth the damage to your long-term financial goals?
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Marshall Clay CFP, J.D., is a Partner and Senior Advisor at The Welch Group, LLC, specializing in providing Fee-Only investment management and financial advice to families throughout the United States. Marshall is a graduate of the United States Military Academy in West Point, New York, the Cumberland School of Law in Birmingham, Alabama, and is a CERTIFIED FINANCIAL PLANNER™. In addition, Marshall is a frequent guest on local television stations as an expert on various financial planning matters.
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