Some say money can buy happiness; others vehemently disagree. Still others say there’s more to being “rich” than dollars and cents. What there is no denying, however, is that money can relieve the financial strain many of us feel day to day.
Thus, we often aspire to get rich. The problem is that we may have little to no idea how to make that happen. And even if you do find yourself rich, there are many more ways to lose money. A few bad decisions can derail years or even decades of good habits.
Getting rich is not a science — there’s no formula or recipe to follow. Staying rich can be an even bigger challenge. Still, there are some steps you can follow to accelerate your pursuit of wealth. If you’re constantly thinking about how to get and stay rich, these tips can help you.
Set Challenging but Attainable Goals
As mentioned earlier, the concept of being rich is not universally defined or understood. Does that mean having $100,000? $1 million? $10 million? There is no actual limit to how much money we can have (at least in theory), so it helps to have a concrete dollar amount as your long-term goal.
It’s helpful to have shorter-term goals too, though. For instance, you might want to add $250 to your emergency fund every month or max out your Roth IRA every year.
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Decide What ‘Rich’ Means to You
You may also want to clearly define what “rich” means to you beyond just dollars and cents. For example, it could mean spending more time with family and friends, learning a new skill, or having more time to volunteer in your community.
Many of us don’t spend as much time doing these things simply because we’re too busy working. Thus, being rich is the point at which you have time for the things that are important to you and aren’t always stuck at the office.
While some states are now mandating personal finance education for high school, there is still a considerable gab in financial literacy. Until financial education becomes more common, there isn’t a single way to learn.
You can read personal finance books, listen to podcasts, or, yes, take a course on financial literacy. Learning the basics will go a long way.
Learn How To Budget
Budgeting is important, but all too often, you hear someone say “start a budget” without much detail about what that means. That said, we can’t get too into the details here, but start with this budgeting guide from GOBankingRates. It breaks down some common types of budgeting, such as 50/30/20 and zero-based budgeting.
Take Advantage of the Power of Compounding
Compounding interest is one of the most important keys to getting rich. However, it can be tough to grasp how powerful it is if you don’t experience it firsthand.
Suppose you invest $10,000 and earn a 10% annual return. After the first year, you have $11,000 — $1,000 in interest. But if you keep your money invested, you earn $1,100 of interest in the second year, $1,210 in the third, and so on. By end of the 10th year, you are earning over $2,000 in interest — more than double what you earned the first year.
Ten percent is a high return, and, indeed, most investors don’t count on a return that high; 6% or 7% is more common. Still, the S&P 500 has returned about that much annually when you take a long view of the index’s history. Keep investing every month and your money will grow more and more rapidly over time. This is the power of compounding.
Be Willing To Make Sacrifices
If you want to have more money (or more time) than most people, you will have to make sacrifices, at least initially. That could mean you spend less money on hobbies or that you work more.
It may not always be enjoyable, but this is why you have both short-term and long-term goals. Eventually, your efforts will pay off if you stick to the plan.
Always Keep Learning
No matter how much you learn, there is always more knowledge to uncover. A sense of humility will go a long way in helping you reach your goals. This is not to say you should completely change your investing strategy every year.
There are certain investing basics you should always follow, but you might want to make small tweaks. Maybe you want to open a new account like an HSA. As you continue to learn more, you will likely discover these small things that can help you optimize your finances even further.
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