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Investing Is Not For the Faint of Heart

Building wealth is done using a variety of methods. Some are fairly simple and straightforward. Others are much more complicated. To truly achieve financial success and build real wealth, you will need to use a variety of methods to both save and spend wisely. Here is an overview of some of those methods.

Investing

We’re going to talk about investing first because it is, arguably, the most important part of ensuring your financial success and it is one of the fastest ways to build (and lose!) wealth. Investing, whether it is in stocks, bonds, real estate, precious metals, utilities, government bonds, mutual funds, etc–is like gambling. Many of the investments you make will be in fields that are influenced by the whims of the free market. This doesn’t mean, however, that you shouldn’t invest! On the contrary, it just means that you need to learn about investing and the market before you hand over a pile of your hard-earned money.

There are a lot of ways to learn how to invest. If you are mathematically inclined, you might learn best simply by paying attention to the market or reading a couple of books. For many, however, learning about investing directly from a professional is the best way to go. You can take a class either locally or online. You can also work with programs like Simpler Trading, which provide environments through which you can learn directly from current investing professionals. The method you choose will depend largely upon your learning style.

It is also important to know yourself well before you invest. For many people, gambling can easily become addictive and overwhelming. If you have a hard time walking away from the tables when you visit a casino, you might have trouble with investing. That doesn’t mean you should avoid it altogether! You can still invest, but you will want to hire someone to manage your portfolio for you instead of trying to do it yourself.

Saving

It is vitally important, if you want to be wealthy, that you not only spend less than you earn but that you save more than you spend. When you are younger or if you have found yourself burdened with debt, that might not be immediately possible. Still, it is the goal.

To start saving, the simplest method is to set up a savings account with your current bank. Set it up so that 10% of each paycheck is diverted into that savings account and do your best to leave it alone! As your savings grows, you can transfer portions of it into higher yield accounts (aka accounts with higher interest rates).

In addition to your simple savings account, you should also set up a retirement account. The most common types of accounts are IRAs and 401(k)s. These are accounts with high interest rates and penalties for withdrawals before the account matures. If your employer offers matching to a 401(k), make sure you take them up on it!

If you are burdened with debt, do not count these options out. Instead, set up a reasonable plan of action for paying down your debt so that you can increase your savings amounts as soon as possible. Work with credit counselors and debt consolidators if your situation is complicated or you feel like you are in over your head. As you pay off each debt, pay what you would have paid each month for that debt into your savings account instead.

Spending Less

If you’re dealing with debt and low wages, you’re likely already an expert in spending as little as possible. For the rest of you, try looking around for areas in which you can cut back and put that money into savings instead. There are lots of ways to reduce your spending without feeling like you have to go without or deprive yourself. Get creative!

It is a combination of all of these efforts that will guarantee your future financial stability and wealth. Investing, saving, spending frugally–they all matter. If you can master these, you’ll be set for life!