Today we’ve got a guest post from Jennifer Kempson over at MamaFurFur all about the 4 money principles you should follow if you want to be rich!
Everyone wants to be rich, to have enough money to live and create their dream life without the need to work for someone else to make that money.
But most people believe that it is only the very lucky who will get there, or have to rely on a lottery big win to ensure that happens in life.
Here’s the truth – ABSOLUTELY ANYONE can be rich enough to have the life of their dreams with commitment and dedication.
All you have to do is know and trust a few simple money principles and keep your eye on your financial goal.
Here are the four principles tried and tested that will get you to your goal.
Step 1: Start investing in your future today and DON’T STOP!
The single most important principle, and the younger you apply it the better, is to pay your future self a portion of every pound you earn right now.
A good place to start is aiming for 10% of your Gross Salary each month to go straight to your future self in Pensions or Investments.
Reason being if you use a portion of your money each month to generate income when you choose to retire from working, you are creating security and income when the days come that you don’t want to or can’t work.
To aim for the Goal of financial freedom and retiring earlier than normal retirement age of 65 – you want to aim for as high a percentage of your Gross Salary as you can comfortably live, and usually at least 25% and above.
Understanding the power of Compound Interest on your money and investments, where the natural laws of time allow your money to grow and multiple faster, is key to this wonder of saving a portion of your money each month.
Normal savings accounts currently offer between 0.1% – 1% interest rates if you are lucky, so do all you can to feel comfortable and research investing in Stocks and Shares to get the maximum return on your money you are investing.
A good place to start might even be to look at ISA accounts (Cash or Investment) where the government will not charge you Tax on your interest increases up to a limit of £20k a year per person.
If you feel confident enough to – Put your money into the stock market, giving someone else your money for short term to make more money with on their efforts and create passive incomes from your savings too.
Never pass up the opportunity for FREE ADDITIONAL Pension contributions from your employer towards your future.
Most companies offer additional pension contributions as a way to effectively pay you a higher wage, without the tax costs to themselves.
If you company offers your matched contributions, make sure you sign up to the maximum percentage you can afford as for every wage you put in they are also adding even more money to it for your future.
Want to become Financial Free? There is even some simple maths to find out the exact amount of money you need to have saved to generate income for life.
Simply take the total amount of money you need each year to live and survive, or have the life of your dreams with, and multiple that by 25 to give you your exact Financial Freedom Goal Number.
Next is to work on a plan to save and achieve it.
Step 2: Spend your money like it was your last penny.
Rich people who stay rich for life spend their money smarter than most people.
They take time to find the best deal, time to consider if they really need that purchase and make sure that it is an investment worth their while and won’t lose money.
Too often we end up mindlessly spending money on luxuries we don’t really need, so perhaps give yourself a 24 hour cooling off period each time you “Click to basket”.
Check if you truly want that item, have found it at the best price possible, before you hit the order button.
Take time to be more mindful with your spending and you will find that the pennies all start to add up quickly to a small fortune.
Step 3: Keep your living costs as low as you can
Minimise all your expenses and keep looking to exchange your hard earned money for what you truly love only.
When you start a journey to financial security or freedom, we need to take time review our spending habits each month and make sure what we spend money on is worth it.
Regularly look for ways to reduce your subscription spending – think car, home insurance, phone contract costs, credit card charges and ask the company for a better deal.
You can save potential hundreds of pounds back into your pocket with a 10 minute phone call and a little effort with comparison websites.
Test your spending every few months by taking non-essential bills (such as that magazine subscription or gym membership) and go “cold turkey” for a week or monthly only. By setting yourself a temporary goal of going without for only a short time, the sacrifice won’t seem so tough and you never know what you might find out about your spending patterns in the past.
Use the 10% Overpayment Rule to get rid of as many debts as you can, if you can without any overpayment penalties.
By paying 10% more on your monthly repayments for any debts, such as your home, car, credit cards and store cards you will very easily and without noticing pay one extra monthly amount towards that debt each year.
That overpayment could take years off your payments, returning more money to your pocket sooner than the bank or company would have liked.
Step 4: Start your own side business.
We live in a world where a single source of income, one job all your life, is no longer guaranteed.
We also live in a world where we have information and resources are literally at the touch of our fingers via the Internet, and absolutely anyone can put in the time to start their own side business.
Look to start a side income to add even more money to build your fortunes with, and also something you are passionate about if possible.
When you are able to control and generate profit from your own business, rather than work for an Employer, there will be no limit to the confidence it will bring in our life and to your earning potential.
By diversifying your household income as much as you can with a few income streams is not only a smart thing to do, but a great way to protect your financial security in the future too with your own talents and merits.
Think about turning a hobby into a small weekend business, or perhaps using a talent from your main job as a freelancer for some income in the evenings.
Over to you now…
Now is the time to work on your riches.
By putting into action and committing to these simply principles, you too can create riches in your life so that you become financial security in the years ahead.