Accumulate Wealth and Be Comfortable
Whether your goal is to become a millionaire or to just be financially secure, we’ve got a few practices to help you accumulate wealth and become comfortable.
These tips come straight from David Bach, self-made millionaire and best-selling author. Bach outlines a one-step plan to get rich by making it automatic in his book “The Automatic Millionaire”.
Pay Yourself First
Bach says there’s one proven easy way to get rich and that’s to pay yourself first. This is not a new or exciting idea, but it works. However, most people just don’t do it.
When you earn a dollar, the first person you pay is you.
When most people earn a dollar the first thing they do is pay everyone else. They pay the landlord, the cable company, the credit card company and then they get what’s left. Bach calls this strategy positively financially backwards.
The correct strategy is to set money aside first. You should be saving the equivalent of one hour’s worth of income each day.
You earn $50,000 a year. That’s approximately $1000 a week, or about $25 an hour. In this case you should be saving about $25 a day for yourself.
Also, don’t just put this money in a savings account. Make sure it goes to work for you. Put it aside in a tax-advantaged retirement account like a 401k. This way it grows with minimal effort over time.
The key to achieving this week after week is to make it automatic. Have your contributions automatically deducted from your paycheck or transferred from your primary bank account.
Bach argues that not making home-ownership a priority is the single biggest mistake millennials are making. He calls buying a home an escalator to wealth.
The average home-owner to this day is 38 times wealthier than a renter. As a renter you can easily spend half of a million dollars over time. If your rent is $1500 per month in 30 years that will have been $540,000, and all of it went to paying someone else.
If you want to get into home-ownership start by crunching the numbers. A good rule is to make sure your total monthly housing payment isn’t more than 30 percent of your take home pay.
Of course if you have questions about becoming a home-owner you can contact me and I’ll be happy to help.
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