5 Essential Principles of Building Wealth
đș Most of us have never been taught how to manage our money. This includes everything from budgeting and planning for the future but also how to save in the short term for the things we really want.
So, how do we balance our goals and make sure we can achieve our goals and feel financially secure or independent?
1. invest in yourself
âYouâre allowed to prioritise yourself and the most important relationship in your life is the one you have with you. â
Several studies have found that individuals who focused on personal growth experienced increased levels of confidence. And when we feel confident in ourselves, we are more likely to feel better about our work and in our personal lives.
So how can we invest in ourselves to ensure personal growth as well as monetary growth?
First, never stop learning. Whether thatâs reading books that help you see new perspectives or taking a course to upskill yourself, part of a growth mindset is always willing to learn new things, and of course, unlearn past things that are no longer helpful or serving you.
Next, focus on aiming higher. Donât settle for work that refuses to promote you or give you a raise (of course I mean this within reason - you know whatâs best in your situation!). Learn how to be more confident in asking for more, youâre worthy - it doesnât matter if youâre a self employed freelancer, and entrepreneur or work full time, itâs all about being able to get paid what you deserve. Earning more enables you to save more. Cutting costs and budgeting is helpful but thereâs only so much you can save if youâre not earning enough!
Then, itâs important to take care of your mental and physical health. We donât want you burning yourself out, so doing things like eating well, meditating maybe, exercising, journalling, seeing a therapist â whatever it is that recharges and helps you feel less stressed.
Finally, cut out the clutter in your life. This means anything that brings you down - from toxic relationships to social media overwhelm to unhealthy habits. Youâre allowed to prioritise yourself and the most important relationship in your life is the one you have with you.
2. get concrete with your goals and save for them
A Harvard Business study revealed amazing statistics relating to goal setting and success. The study went on to find that the 14% who have goals are 10 times more successful than those without goals. The 3% with written goals are 3 times more successful than the 14% with unwritten goals.
The idea behind how to visualise your goals is that if you âseeâ your goal, you are more likely to achieve it. Studies suggest that the brain finds it hard to differentiate between a real and a visualised image. This is based on the idea that when you visualise an action, you stimulate the same regions of the brain as though you have actually performed the action.
One way to visualise something is to focus on the outcome â think of the visualisation as a movie rather than a static picture. So find a comfortable, quiet place, close your eyes and play the âmovieâ of your goal - for example, your dream house. What does it look like? What area is it in? Does it have a garden or a terrace? What does it smell like? Try to get as many details in as you can.
You can use this visualisation technique, but donât forget the importance of writing down your goals too. You should split them into timelines: short-term, medium-term, and long-term.
Next, you should write down the steps you can take toward those goals: how much should you be saving for each goal per month? It helps to have an accountability partner or two who can help keep you on track.
When you invest your money, it has the potential to grow over time through compound interest. This means that you earn returns on your investment, which you can then reinvest to earn even more returns. Over the long term, this can result in significant wealth growth. However, investing also comes with risks, so it's important to educate yourself before investing and consider working with a financial advisor to help create a plan that aligns with your goals and risk tolerance.
Also, remember to frequently evaluate your progress and make changes as needed - your goals donât need to be set in stone.
3. SPEND WITH MORE INTENTION
When we talk about spending with more intention, we mean aligning our spending and saving with our values. Think about what matters to you and write it down. Once you have your list of 3-5 core values, you can apply your values to how you save, spend, invest, and plan your money.
For example, if you value âexploringâ maybe you want to save up for a big trip. If you value âfamilyâ, you might want to focus on saving for a family home or your childrenâs education. If itâs âfreedomâ, you might want to focus on building a post of money that will allow you to have more choices later down the road.
Keeping your intentions in mind is especially helpful in tackling overspending or curbing impulsive spending habits for example. Before any impulsive purchase, ask yourself a) whether you will still want/enjoy it in a yearâs time and b) if it aligns with your greater goals and values.
Spending with more intention will help you live below your means - finding the right balance between saving and spending. By being mindful of my expenses and avoiding unnecessary purchases, I've been able to focus on what really matters to me, like investing in my future and pursuing my passions.
4. FOCUS ON BUILDING SMALL HABITS
Habit stacking is based on the Tiny Habits method popularised by Social Scientist BJ Fogg. Itâs also referenced in the book Atomic Habits by James Clear. It involves stacking a new habit you want to pick up on top of an existing one.
If, for example, you're struggling with credit card debt, and youâre maybe not able to control your spending habits, make a small daily habit of checking in your bank account each morning after you brush your teeth or after your morning coffee.
It takes 1 minute - your current habits are already built into your brain - patterns and behaviours. By adding or linking your new habits to a cycle that is already built into your brain, you make it more likely that youâll stick to the new behaviour.
Itâs important to remember that small efforts compound over time - so when looking at your big resolutions, try to break them down and see what small habit you can add to your routine.
5. WORK ON YOUR MONEY MINDSET
Money is not just about numbers. Having a healthy and positive money mindset is crucial for financial stability and success. Unfortunately, many of us struggle with limiting beliefs, fears, and negative attitudes towards money. The good news is that it's possible to work on building a healthier and better money mindset.
The first step is to identify your existing beliefs and attitudes about money. Take some time to reflect on your upbringing, experiences, and cultural influences that may have shaped your beliefs about money.
Also, you may think that money is a scarce resource! You believe that there's not enough to go around, you're constantly worried about money and never feel like you have enough. Instead, focus on an abundance mindset, where you believe that there's enough money and resources to meet your needs. This will help you feel more positive and open to opportunities that can help you build wealth.
I always recommend reading Mindset: The New Psychology of Success by Carol Dweck and The Psychology of Money by Morgan Housel.
Practicing gratitude is another powerful way to develop a healthier money mindset. Rather than focusing on what you don't have, focus on what you do have and express gratitude for it. This will help you feel more content and appreciative of the resources.
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