Personal Finance

How To Become Wealthy Fast

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 14 minute read

If your habits don’t match your desire, you need to either modify your habits or change your dream, according to the author and motivational speaker John C. Maxwell. Not everyone envisions becoming wealthy. If you do, though, you must begin forming the habits that will lead you there.

You don’t have to start all of the habits on this list right away, and you shouldn’t. Choose one, perfect it, then pick a new challenge. You gain momentum on the path to prosperity with each positive money habit you develop.

Financial Planning & Management

A solid financial situation is difficult to maintain without a budget or any other form of a financial plan. If you spend every dollar you earn, your income is meaningless. If they each spent all of their money during the year, a person who made $1 million and another who made $20,000 would wind up with the same amount of wealth at the end of the year.

1. Develop & Monitor Your Budget Based on Your Savings Rate

Making a brand-new budget from the beginning is the best way to go about increasing your savings rate. Apps like Tiller and MoneyPatrol make this process very quick and easy.

The major areas in which you can cut costs are those associated with your home, car, and food. Almost two-thirds of a typical American family’s budget goes toward these three areas, as reported by the US Bureau of Labor Statistics. But substantial cost savings like downsizing your home, house hacking, or getting rid of a car typically necessitate major lifestyle changes.

Start taking baby steps toward your ideal budget by dropping services you seldom use or aren’t excited about, like cable and a gym membership, while you save money on groceries and other necessities.

A service like Billshark can help you reduce your monthly payments by negotiating with your utility companies.

2. Align Your Financial Vision With Your Spouse

If your spouse doesn’t support your financial goals, they will be incredibly difficult to achieve. My wife and I struggled for a long time until we finally settled on some shared financial priorities. At the moment, she plans on going all out. I intend to amass a substantial fortune by means of diligent saving, so that I may enjoy early retirement.

I believe that monthly conversations regarding our financial situation and our progress toward our goals are what finally brought my partner and me together after years of arguing, moving abroad, giving up automobiles, hiring a full-time nanny, and finding a happy medium.

I decided to start making a monthly report and drinking wine with her while we discussed it. It detailed not just how much money we made and spent each month, but also our overall net worth and how far we’d come in the pursuit of our objectives.

Using personal finance applications like Mint and Personal Capital (see our Personal Capital review) to automatically gather all our financial data saves me a ton of time each month, so I’m able to put together the report in under 15 minutes.

My wife is more willing to forgo extravagant spending like shopping trips and hotel stays now that she can see our net worth improving and our progress toward our short-, medium-, and long-term goals.

There are negative and positive aspects to this. It took careful listening to figure out what she could give up and what she absolutely couldn’t. In that case, I had to make the necessary sacrifices and not hold them against her.

3. Streamline all expenses (Including Savings)

It’s impossible to keep track of every bill and make sure it’s paid on time every month. A good budget always lists the savings rate as the first and most important item to pay for. 

You can save more money by establishing a regular savings or investment plan and allocating a certain percentage of your after-tax income to savings or investments. Prepare automatic payments to be made each time you are paid.

You may also utilize automated savings applications to schedule other savings events if you wish. Acorns, for instance, can automatically transfer the spare change from your debit card transactions to a savings account whenever a transaction total is a round number. Of course, you shouldn’t stop there. 

Automate the payment of your monthly mortgage or rent, car payments, utility bills, credit card payments, and any other bills that you can. The less you have to rely on habits and discipline, the more you can automate beneficial actions.

4. Get Ready for Unsteadiness

Sometimes you get a surprise expense or have a sudden emergency. They happen so frequently that you have no need to be surprised when they do.

Somehow, if it isn’t an unexpected expense to fix the automobile, it’s a bill to fix something in the house. The alternative to a medical emergency is losing one’s work. As if one crisis weren’t enough, sometimes multiple occur simultaneously.

Having a savings account set up for unexpected expenses is a need for everyone. Plan to keep at least one month’s costs in cash, and many additional months’ expenses in other quickly accessible sources of funds; the exact amount and form of your emergency fund will depend on your specific needs, financial stability, and risk tolerance.

My emergency fund includes a portion of my savings invested in a Treasury bond exchange-traded fund. Alternatively, one might put the funds in a CIT Bank or similar high-interest savings account.

The creation of a rainy-day fund is only the beginning of prudent planning for the unexpected. This also includes making sure to renew important insurance policies like health and property protection plans.

The bad news is that it happens every year, and frequently more than once a year. It’s just the way life is, and the rich are smart enough to anticipate these kinds of things, so they’re not caught off guard.

5. Reduce Your Spending as Your Income Increases

The typical person will find a way to blow their pay increase as soon as it hits their bank account. A bigger house, a flashier car, or regular restaurant outings are all possible outcomes. This practice ensures that you will never become wealthy, regardless of how much money you make.

The term “lifestyle inflation” describes this trend. And if you want to amass riches, you’ll have to actively protect yourself from it. Rectifying your financial plan to cut costs is a good starting point. However, the real challenge comes later, when you have to fight to keep your spending in check despite your increasing income.

If it seems too austere, you could always just spend a little more each time you get a rise. You should allow yourself to spend a certain amount of any future raises in salary.

Let’s pretend you earn a raise of $1,000 per month and decide to spend $250 of it on yourself. To compensate, you make a change in your financial plan and allocate an additional $250. If you want to amass riches more quickly, the secret is to always keep your savings rate in mind.

Activity & Career Income

Saving money is helpful and is a wonderful defense strategy. Offensively, gaining a higher income is helpful. The path to financial security is widening the difference between your income and your outgoings. You should maximize the growth of that chasm in both directions simultaneously.

6. Begin by Creating a Lifestyle

Too many people choose their vocations and professions based on how convenient they are. However, the work-life balance and non-work luxuries they want aren’t necessarily provided by these employees.

Do not only seek financial success. To get started, put down on paper your ideal life in terms of where you reside, what you do for a living, your commute to and from work, and whether or not you telecommute.

The next step is to get moving on making that a reality. This could necessitate going back to school for an additional qualification or degree, or taking a pay cut in the short term. But what’s the sense in settling into a life that you didn’t choose for yourself but rather stumbled into due to parental aspirations or social pressures?

Follow your own path, but make sure it leads you toward your long-term goals.

8. Find a Mentor

Learning from those who came before you on your chosen route is a wise investment in yourself. Look for a role model who is already living the life you envision for yourself and learning from their experiences. 

Instead of paying for a coach or mentor, you can use MicroMentor.org, a network of mentors who donate their time to help others.

Rather than starting from scratch, make use of what already exists. The best way to avoid making the same mistakes twice is to learn from the experiences of those who have gone before you.

8. Never Stop Learning or Lose Touch

To paraphrase a cliche, leaders are readers. They are always curious about new things, open to new experiences, and never complacent. That calls for a dedication to keeping up with the latest information, especially as it pertains to your own field and profession.

When I’m making breakfast in the morning, I like to take five minutes to read the business news in Morning Brew (see our review of Morning Brew) and another five minutes to listen to the BBC World Service news summary of the top overall news stories from across the world.

But looking at the big picture is also essential for lifelong learning. Personal and professional development via media including books, audiobooks, blogs, podcasts, and online video courses. New credentials in your field of work may be the result.

To what extent your job or personal life could benefit from a certain change, only you can say. But whatever path you take, keep in mind that the most successful and contented people make growth a habit.

9. Look into Extra Active Income Sources

In order to increase your income, a promotion at work is not necessary. In today’s gig economy, it’s easier than ever to start making money quickly on the side.

Driving for services like DoorDash, Instacart, and Uber are examples of low-skill jobs that could provide some downtime. High-end graphic design and professional writing are other examples of freelancing careers that require specialized skills. Entrepreneurial types often start a business in addition to their day jobs.

Learn to make effort a habit. When I was a kid, my dad always drilled into my head that a 9-to-5 job was only to get by and that real success was found in the things you did on the side.

This includes continuing one’s education, finding supplementary means of income, or launching one’s own enterprise. All of this work has one ultimate goal: making your dream life a reality.

Investing

It’s great to save money, but how will you put that money to use? You put it to use in the economy. A popular quote from “Rich Dad, Poor Dad” by Robert Kiyosaki goes as follows.  The rich don’t work for money. When they spend their money, it benefits them.

In addition to long-term development, another way that your money can earn you money is through passive income. And both work silently in the background to increase your money over time.

10. Create a Number of Passive Income Streams

Dividends from the stock market, rent from rental properties, interest from private notes, and other indirect real estate investments like Fundrise all bring in cash while I snooze. In the long run, I hope to amass sufficient passive income to allow me to pay for my day-to-day needs without having to worry about earning a living wage.

As such, the objective is to generate sufficient passive income to pay all of your outgoing costs. The key to retiring early, at age 35 or 75, is having money that is not contingent on working a job.

Having a steady stream of money coming in without having to actively work for it frees you up to try new things and take more calculated risks.

According to Thomas Corley’s research published in his book “Rich Habits,” “at least three streams of income that they developed” were in place for 65 percent of the 177 self-made billionaires in his study.

11. Make Regular and Automatic Investments

Many people who have never invested before feel overwhelmed by the prospect of buying stocks, bonds, real estate, or any other type of asset. The good news is that you don’t have to be wealthy to get assistance with picking an investment strategy, making purchases, and monitoring your portfolio.

Some of the more reputable Robo-advisors, such as SoFi Invest and Charles Schwab, don’t even require you to pay them anything to use their services. Nonetheless, they handle your investing decisions according to your objectives and comfort level with risk.

The best part is that you can programmatically execute all of your investment needs, such as buying stocks and rebalancing your portfolio using funds from your checking account.

Every week, I have my Robo-advisor transfer funds from my checking account into my brokerage account so it may invest on my behalf. In other words, I won’t have to worry about it.

By doing this on a predetermined schedule a strategy known as dollar-cost averaging, I am able to remove my emotions from the investment process and so lower my overall investment risk.

Credit & Debt

Paying off expensive credit cards and loan balances is a prerequisite to building money. Why bother investing money in the stock market for a 10% average return if you’re paying 20% interest on credit card debt?

Numerous Americans are burdened by high levels of unsecured debt. In order to amass riches, responsible financial practices are required.

12. Make Monthly Payments in Full for All Unsecured Debts.

Your focus should be on the highest-interest, unsecured bills first. Credit cards are the most obvious example, but other forms of debt, such as personal loans and education loans, fall under this category as well.

In all likelihood, you have heard that bill paying should be automated. Now, depending on whether you’re using the debt snowball or debt avalanche strategy, prioritize paying off your smallest obligation or your debt with the highest interest rate first.

Continue on to the next loan when you’ve paid off the current one. One after another, until you no longer have any unsecured debt.

The debt is not secured by any personal assets such as a house or car, hence the term “unsecured.” Secured debt, such as a mortgage or car loan, typically carries a lower interest rate and is therefore lower on the priority scale.

13. Enhance & Monitor Your Credit

Making on-time monthly payments is the first step toward better credit. If you pay off your credit card balances in full every month, you’ll make progress.

Don’t cut up your credit cards just because you’ve paid them off. Credit bureaus will reward you if you have accounts that have been open for a long period of time on average. Learn about more methods that can help you raise your credit score so you can keep working to do so.

Keep tabs on your credit score monthly using a service like Credit Karma. Although the aforementioned practices will undoubtedly lead to an increase in your score, it’s important to remember that credit bureaus make much more mistakes than the average American is aware of.

If you use a credit monitoring service, you may quickly identify mistakes and correct them before they have a negative impact on your score.

Changes in Lifestyle that Support Wealth & Happiness

You can be happy without a lot of money, but it helps. My life, to paraphrase another of Robert Kiyosaki’s ideas, has included both happy and sad periods, as well as periods of relative affluence and poverty. 

Let me tell you something even when I was miserable and had plenty of money, I preferred those times to the days when I was miserable and had no money at all. While it’s true that money can’t fix everything, it can fix a lot of issues.

When money is tight, even the smallest of unexpected bills can feel like a catastrophe. You fear and stress out over how to pay for the $500 car repair. 

You can spend all of 30 seconds complaining to your partner about the car payment when you have an emergency fund, and then you can go on with your evening without further thought to the matter.

Although money can’t buy contentment and the opposite isn’t true either, there are often surprising connections between the two.

14. Take Good Care of Your Physical, Mental, and Emotional Health.

If you’re constantly exhausted, down, and unmotivated, it’ll be tough to perform at your best at work and make more money. When you’re not feeling well, you’re more prone to spend money on unhealthy or otherwise wasteful distractions. Taking care of your health might also boost your bank account.

Get at least 7 hours of sleep nightly, preferably 8. Try to exercise daily, even if it’s just for 15 or 20 minutes at home. A nutritious diet, preferably one that doesn’t break the bank, should be a top priority.

Connect with others regularly, especially those who support your aspirations more on this in a bit. Enjoy some time off to explore the world and indulge your interests.

The flight attendants will tell you to put your personal oxygen mask on first because if you don’t take care of yourself, you won’t be able to help anybody else. Taking care of yourself allows you to better serve others as a spouse, parent, friend, and worker.

15. Surround Yourself With People Who Share Your Views

People who are like-minded don’t have to agree with you politically or never give you a new perspective. I’m referring to those that support you because they believe in your long-term financial and lifestyle goals.

You truly are like the five people you spend the most time with, as the old adage says. Spend more time with people who also run successful internet businesses if that’s what you aspire to do. 

Get together with people who have the same long-term financial goals as you have because they won’t be suggesting $200 dinners every weekend if they know you’re trying to obtain financial independence early in life.

Attaining long-term objectives takes consistent discipline, and we all know how easily that can slip. If you have supporters who believe in your vision, you can get back up again.

In addition, you are exposed to novel concepts that can hasten your progress toward your objectives.

16. Give Back each month

In addition to financial contributions, the wealthy often provide their time. 72% of self-made millionaires, as reported by Thomas Corley’s Rich Habits, donate at least five hours of their time to charity each month. What was your monthly volunteer total?

Volunteering has dual benefits it aids the community at large and improves your own life as well. 76% of participants who had volunteered in the previous year reported improved health, 78% reported reduced stress, and 94% reported increased happiness, according to a survey conducted in 2017 by United Healthcare and VolunteerMatch.

Volunteering may increase longevity, according to the Mayo Clinic. To tie this all together, a study conducted jointly by the University of South Carolina and Stockholm University indicated that giving persons have a higher average income after adjusting for other factors.

Bottom Line

Technology now allows you to automate many of these routines, making them easier to maintain and requiring less self-control on your part. Even if you still have a few habits to develop, all you really need to get started is discipline. Good habits, once formed, are often maintained automatically. 

To take one simple example, you don’t need a reminder to go brush your teeth. Even still, if there is one thing that separates the successful from the rest of us, it is accountability.

Daily, successful people accept full accountability for their actions and their results. They don’t shift the responsibility or make hasty explanations. It’s their responsibility to pick up the tab.

No one else, not even your boss, the economy, or the stock market, is to blame for how well you do professionally. Everyone around you will like and respect you more when you take charge of your life and make every decision for yourself. 

A whiner will gain no friends. But everyone has a great deal of respect for individuals who accept responsibility for their lives, both the good and the bad.

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