We have recently been looking at the importance of saving in designing a financial success plan. While it is critical to consistently put aside a portion of your income to create an emergency account and build an opportunity fund, the reality is that saving alone won’t make you rich.
Saving is essential to help you develop discipline with money, and it also allows you to focus more attention on accumulating money instead of just spending it. In addition, your savings can give you a head start to pursue more lucrative financial options to create long-lasting wealth.
What Does It Take to Build Wealth?
If you have been saving diligently and you are a little disappointed with the slow growth of your bank balance, you need to start employing strategies that will enable you to boost your results. Unlike the relatively passive act of saving, however, building wealth takes a lot more expertise.
I like to utilise clever Jamaican sayings to help clarify money concepts. Our snippet of wisdom for this week declares, “Wise monkey know which tree fi climb.” An experienced monkey searches for the trees with the best food sources and avoids those which hide potential danger.
Similarly, if you are desirous of obtaining financial security and freedom, you need to educate yourself about various ways to increase your net worth and understand how to evade the pitfalls that may impede your progress. Learning how to multiply your money must be your primary goal.
Multiply Money Through Investing
Two options that can help you to build wealth are investing and owning a business system. Investing is when you put your money into a venture or product with the expectation that it will turn a profit and/or provide an income. Owning a business system can be seen as a type of investment.
Ironically, although investing or owning a business can bring tremendous wealth, they can also lead to a reversal of fortune for inexperienced persons who don’t understand or apply the proper methodologies. It is vital for you to become informed before proceeding blindly down either route.
The first step to implement in your money-multiplication plan is that you need to be realistic about the effort that is required to generate long-term wealth. Many people want to enjoy the trappings of wealth without really wanting to work hard for it; this is why the lottery is so successful!
Achieve an ‘A’ in Investing
Most persons will willingly undertake years of study to succeed in their chosen profession. You must also be prepared to put in the time and effort to obtain an ‘A’ grade in money-multiplication studies, as you will need a combination of preparation, practice and perseverance to succeed.
There are formal and informal ways to learn about the rudiments of investing and business. You can read books and trade magazines, research online, take short courses, obtain professional certification, and get mentored or trained by successful practitioners in your field of interest.
After graduating from the University of Nebraska, Warren Buffett read The Intelligent Investor, a book by investing guru, Benjamin Graham. Buffett was so impressed with Graham’s work that he decided to pursue a graduate degree at Columbia University so that he could learn more from him.
Buffett maintained a close relationship with Graham, and got a job in his mentor’s investment company. After two years learning from the expert, Buffett started his own family partnership at age 25. After 13 years, Buffett and his partners saw a thirty-fold increase in the value of their shares.
Develop Investing Discipline
Another key element of your money-multiplication plan is to exercise the discipline to stick to the rules that govern investing and business. After achieving initial success, some people stray from the principles that guarantee success, and end up suffering the dire consequences of failure.
In 1965, when Buffett acquired an unprofitable business, Berkshire Hathaway, he applied the same investing and business techniques that had worked for him and for his mentor. Not swayed by contrary reports or market hype, he stuck to his established theories of long-term investing.
Since then, Buffett has transformed Berkshire Hathaway into a multi-billion-dollar company and is one of the most successful investors in the world. It was reported that shareholders who invested US$10,000 in his company in 1965 saw this value increase to over US$50 million, forty years later.
Persist with Investing Principles
While you may not aspire to, or achieve the wealth that Buffett has amassed, you can still apply his techniques of learning about investing, gaining experience through mentors, employing proven strategies, persevering through the fluctuations, and adhering to the cardinal rules of investing.
Another pivotal part of your money-multiplication plan is the application of strategies to protect and preserve your wealth. Like the wise monkey in our proverb, you must know how to avoid the trees that are treacherous, or else you will jeopardise everything you have worked hard to obtain.
Next week, we will look at some of the steps you need to employ to ensure that you can maintain your wealth for the long term.
You can get more detailed advice on ways to improve your finances in my new eBook, The 3 M’s of Money: How To Manage, Multiply and Maintain Your Money.
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Copyright © 2016 Cherryl Hanson Simpson. No reproduction without written consent.
Originally published in The Daily Observer, February 4, 2016.
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