How to create wealth – a simple guide

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Once we’d made the decision to get debt free (see my story here), a funny thing happened. Not only did we decide that we were going to focus like never before and pay off all our debts, but we were going to become wealthy as well.

We wanted to see if it could happen for us. Having had some bad money habits that have been ironed out over the last few years, was it really possible that we could go on to create wealth just by following what was a really simple plan?

Getting out of debt and creating wealth, were intertwined and heavily connected for us.

I realise it’s perfectly fine to get out of debt, which is a massive achievement in itself, but I wanted to go the whole hog. I became pretty interested in what wealthy people did that differed from the rest of us.

So many of them are not born with wealth and make this clear in interviews and books. So what were they doing, and what could we do, as one average family do, to create wealth?

It turns out, there are a number of things that people with wealth do that we, along with the vast majority of people, just don’t do.

I discovered that creating wealth isn’t complicated. It doesn’t take huge amounts of money to get going and you don’t need to be high earners (although this would definitely speed things up!). What you do need, is the ability to stick with a plan, and stay with it come what may.

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Budget for wealth

Budgeting. Simple? Yes. Heard it before? Of course, but arguably the single most important thing you can do to change your financial future for the better.

If you’re not budgeting yet, start now, today. We use a cash budget, simply because it keeps us on the straight and narrow and takes all temptation away. It’s super easy to do. There are budgeting apps and worksheets you can use. Whichever method you choose to go for, there are a couple of things you need to keep in mind.

Firstly, it’s not enough to live within your means. While living within your means is okay, it’s not going to allow you to create wealth. You’ve got to live under your means, and considerably so. The more space you can create between your income and your outgoings, the better. You’ll have more money to put away.

Secondly, making your budget fit your family is the only way you’ll be able to make it work long term. We’ve got some tips on making a personalised budget here. There is no other way that I’ve found to keep our spending in check than a budget.

If it seems a little restricting at first, remember the freedom it’s helping you create! That budget is your key to wealth and the sooner you start, the sooner you’ll be on your way to financial security!

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Earn more money

Earn more money. The key to creating wealth is to focus on the goal. Budgeting is great and can be amazing, helping you to prioritise the important places you can save money. But it can only do so much. There is only so much money you can save each month after your paid from work and paid all the things you need to.

If there’s not enough or you’re struggling to save much at all, you need to earn more money. It’s that simple. There are so many ways to bring in some extra money if you’ve got an internet connection. Really, there are loads.

There are online ways to make money here,that I’ve tried myself and know work. If you’re not into making money online, get a side job to bring on some extra cash. You’d be surprised how a few hours here and there can accumulate and give you the extra cash you need to start saving.

These are some ways to make money offline. I totally get that it’s not always easy to find the time to get out and work after a day at work. Maybe you’re knackered or have childcare issues or something else. I’m confident that there is something that you can do to find some extra money.

Set a goal for wealth

We’ve all heard the saying that a goal without a plan is just a wish, but it’s so, so, true. Planning where you want to be and knowing how you’re going to get there is motivating, and allows you to measure how you’re doing.

Setting a goal shows you wether you’re on track or not to getting where you want to be.

So how do you set a goal? Imagine you’re in the place you want to be, having reached your goal and achieved, in this case, financial freedom and created wealth.

Next, think a little about the steps you needed to have taken to get there. For us, at the start of our journey, it might have looked something like this:

  • Earn more money, increasing second income over time
  • Get all debts paid off, as fast as possible
  • Start saving consistently, adding more as you can
  • Bring outgoings down and monitor these every month to make sure they’re as low as can be

In our case, we have a 10 year plan. It started off with getting out of debt. To aid this, we also started to earn as much extra money as possible alongside regular work. Once this goal was achieved (Dave Ramsey, thank you!), it was onto part two. We kept up the ‘earning more money’ thing we started, and added it to the freed up money being debt free gave us. Then it was onto…..

Saving saving saving

In the whole of my adult life, I’d never had any savings. Shocking? Perhaps, but half of the UK population of adults also have no savings. I can make excuses and give you reasons why we didn’t have any savings, but the simple truth is that we could have saved, but we ‘chose’ not to.

It wasn’t a conscious decision to not save, but not making a decision is a decision in itself and so we spent our money on ‘stuff’. However, at some point along this journey I discovered that buying ‘stuff’ is a sure route to a poor financial future and I stopped.

You’ve only got to see how much a new car depreciates (20% in it’s first 12 months!) by and you’ll see how spending your money on ‘stuff’ is a terrible idea! Creating wealth means having your money making you money, not costing you money!

For so many of us, we use ‘stuff’ to feel wealthy, but it’s a sad reality that many people who outwardly appear to have the things money can buy, have no real security at all. We made the decision to do things differently and now focus on saving, not spending.

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Get rich slowly

Would I like to get rich quickly? Yep. Who wouldn’t. But, the thing is, it’s highly unlikely to happen. People spend a lifetime trying to find ways to get rich quick and honestly? It’s a fast track route to failure.

The way to create wealth for the majority of people is the let compounding do it’s magic.

We use a stocks and shares ISA to save our money. With an average annual return of just under 10%, it’s going to take quite some years to build up to the level where we can take an income out and keep the capital. But that’s the aim. We have an emergency fund to see us through any financial disasters and then save the rest in the ISA.

The power of compounding means that despite starting to save for a future where we don’t have to worry about money a bit late, we’re able to create a fund we can live off comfortably without worrying about it running out.

Tony Robbins has an awesome book about money, savings and compounding and the almost magical effect is has on your finances. It’s well worth a read. Darren Hardy also has a book on compounding that was the first book I ever read on it, and it opened my eyes to the possibilities that were actually out there if only I’d change my money habits.

So anyway, that’s what I did, and I haven’t looked back.

Are we wealthy yet? No. It’s not something that happens overnight. But we are on track to a very bright future, and for the first time ever, we have a little security behind us and a solid plan for the future. It’s all true what they say….starting really is the hardest part.

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4 thoughts on “How to create wealth – a simple guide”

  1. Pingback: How To Help Teens Manage Their Money - Debt Free Family

  2. Wow, I’ve actually never heard of compounding before, I’m going to add these to my reading list! Thanks for the reccomendations :)

  3. Pingback: Reasons You're Broke & the Best Ways to Save Money - Debt Free Family

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