Every dollar is an
investment in the quality of your life.
Build a cash cushion
of 3-12 months of income before you invest.
Track your spending by
writing it down or using online tools to help you.
Having a cash cushion
is an important step before you start investing. Though it’s natural to want to
jump right in and get your money in the market, this can be dangerous. A
successful investor understands that over the short term your investments may
lose money.
We recommend a long-term
buy and hold philosophy when it comes to investing. If you put all your cash
into the market, you may end up needing it in the near future. The market could
be down at that stage, meaning you’ll have to sell your investments for a loss.
If you have a cash cushion, you can leave your investments intact and wait for
a recovery.
You should therefore
try to build up a cash cushion of at least three months salary.
This may sound
difficult, but it’s easy to train yourself to save money, and once you get in
the habit of doing so, you’ll enjoy seeing your account balance go up every
month.
Step 1
Retire short term debt
If you’re paying a
high interest rate on credit cards, you need to retire that debt. You can’t
build long term wealth while paying up to 20% on short term debt.
Step 2
Treat every dollar
like an investment.
This is a crucial
mindframe to get into if you wish to become a successful investor. An
investment is more than just shares. We make investments every day. Some of
these are important, like the roof over our head. Some of these are frivolous,
like a new pair of sneakers you don’t really need.
Next time you pull out
your credit card, ask yourself, “Is this the best investment I can make with
this money right now?” You won’t put your wallet away every time you do this,
but just practicing this routine can help you save a lot of money.
Step 3
Track your spending.
Ever come to the end
of the month and wonder where all your hard-earned money went? It happens to us
all now and then.
A good way to counter
this is to start tracking your spending. There are plenty of apps available to
keep tabs on where your money is going. You might be shocked to realize how
much you spend simply on going out for lunch every day, or on getting that extra
cup of coffee from Starbucks.
These are small
changes you can make that can greatly increase your overall wealth.