Three Steps to Affluence
One of the topics that most people are highly interested in is the prospect of becoming affluent. It is not uncommon at all for people to express a strong desire to become wealthy. However, the majority of people who express this desire are either lacking in knowledge concerning how to create affluence, or are acting on bad advice. Thus, the journey to affluence remains a mystery to many people … a mystery that requires a secret to solve.
The disappointing truth about achieving affluence is that it’s not based on a secret at all. There are three simple, fundamental steps that all but guarantee you will achieve long-term wealth and affluence. These steps are not difficult to understand, but they can be very difficult to do in real life. When taken together, they comprise the Business of Life Wealth Building System ©
The Three Steps to Affluence
1. Spend Less Than You Earn
The first, and most fundamental step to wealth building and affluence is to spend less than you make. Many people articulate this in the popular phrase: “live within your means.” The reason why we like to say spend less than you make is because spending more is not necessarily bad if you earn more. (Assuming that you are still saving to invest) The thing that is important to understand is that our spending profile MUST be defined by our earning profile. When our earnings go down, our spending needs to go down. When our earnings go up, we can afford to incrementally increase our spending.
By focusing on our level of spending relative to our level of earnings, it placed proper emphasis on both items. In the short term, it’s much easier to control spending than earnings. However, over the long-term we can take actions that enable us to increase our earning power. The art of wealth building hinges on the ability to do both of these things effectively. If there is one single thing that destroys more people’s wealth building efforts than anything else, it is a propensity to over-spend relative to their income. Thus, the first and most important discipline is to control your spending so that it fits within your earning profile.
2. Invest The Difference Intelligently
The next step in the path toward affluence is to intelligently invest the difference between what you earn and what you spend. This is one of the places where many people have gotten bad advice from people who are attempting to sell them over-priced seminars and financial products. A popular phrase in the current environment is that “savers are losers” in reference to the fact that inflation erodes the value of dollars that are in savings. However, this analysis misses the fact that many of the best investments require a considerable amount of capital. Thus, one must be a “saver” for quite a while before they can become an “investor.”
The exact structure of your investment portfolio must be unique to you. Only somebody trying to sell you something would try to recommend a path of investment before knowing anything about your personal financial situation. The investment strategy that you choose to pursue should be based on your areas of interest, your depth of knowledge, your willingness to learn, your willingness to commit time to managing your investments, and your tolerance for risk. When investing, it is important to take action when the time is right, and to be patient until the time is right. Most people fall into one camp or the other, with some always wanting to undertake a new deal and constantly looking for action, while others can become locked into analysis paralysis, and talk themselves out of ever taking action. Intelligent investors learn when both action and patience is required, and exercise the right one for the right situations.
3. Repeat Until Affluent
The third and final step toward affluence is to repeat the cycle of spending less than you earn, saving the difference, and investing it intelligently. As time goes by, you will be able to compound your investments into progressively larger deals. Generally speaking, as your base of capital grows, you will generally end up seeking opportunities that are increasingly passive. The reason for this is because all people have the same amount of time in a day. Nobody has the time to personally oversee all of the details for 100 different deals … they simply run out of time.
In many cases, new investors will invest lots of time into their early deals by self-managing properties for real estate investors or taking second jobs to earn more investment capital for investing. Once you have “gotten the ball rolling” on your investing career, this level of time commitment may become less necessary. However, it is important to remember that getting a fast start with your investing career can produce tremendous advantages, since the early dollars invested can compound multiple times, producing an even greater amount of long-term wealth.
As time goes by, following this simple system is all but guaranteed to result in long-term affluence … if it is followed with discipline and diligence.
Ultimately, each of us hold the fate of our future in our own hands. The result of elections, and geopolitical events are frequently at the top of our mind, but are often out of our control. By focusing on the things that you can control, it will enable you to create a happier and more prosperous future for yourself and the people you care about.