Baby step 4 is my favourite baby step! Because this is the step where you begin the path to building wealth for the rest of your life! Let’s recap. You’ve learned how to effectively implement a budget and save up a starter emergency fund. (baby step 1.) You also sacrificed, cut your life style, and scratched together every dollar you could to pay off debt and get the debt out of your life for good! (baby Step 2). After you get out of debt, it's time to fully fund your three to six months emergency fund. (baby step 3).
Here we are, baby step 4. No debt, no need to rely on credit cards, line of credits, car loans or anything else because you are now self insured with your emergency fund. You now have some cash stashed away for a rainy day. With that in mind it’s time to start investing. That’s right, time to start building wealth.
Proverbs 21:20, there is desirable treasure and oil in the dwelling of the wise, but a foolish man squanders it. NKJ. With that in mind let's look at five guiding principles to help you invest and build long term wealth.
1. Don’t Invest In Things You Don't Understand
investing in things you don’t understand is a recipe for disaster… Seriously, it’s a good way to get ripped off. Instead I want you to take the time to research and understand where you money is going and how hard it’s working for you. Getting the guidance of an investment pro can tremendously help. Remember, you are looking for an investment professional with the heart of a teacher. Someone who can walk with you in your specific situation.
2. Interview Investment Advisors
Yes you will want to interview your investment advisor.Read 5 questions to ask when interviewing an investment professional. I want you to look at it this way, "You incorporated" are about to hire someone to manage your money for you and your family. You want to make sure they can do the job and that they fit within your goals, not their goals. This person should have the heart of a teacher, as well as be able to explain how he plans on getting you to your financial goals.
3. Invest 15% Of Your Income
Now that you don’t have a car payment or any loans, it should be pretty easy to start investing 15% of your income. Investing 15% will allow you to put a good amount of money away for building long term wealth and still leave enough cash to do other things, like pay off your mortgage early, save up for a home, vacations, etc.
4. Do This Every Month
Being consistent every month is how you will get the best value for your dollar through Dollar Cost Averaging also known as DCA. An example of Dollar Cost Averaging is putting $100 every month into a mutual fund. Some months you buy more shares because the mutual fund is down, other months you buy less shares because the mutual fund is up.
5. Building Wealth Takes Time
You need to understand that there is no "get rich quick" scam when building wealth long term. It takes time, character and consistency. Time, allowing your money to grow during your working years. Character, sticking to the game plan, even during an up or down economy. Consistency, committing to investing at least 15% every month.
You’ve worked and sacrificed hard for your money. Now it’s time to put your money to work for you by investing it in the right places. We can connect you with investment professionals that we trust, who have the heart of a teacher and provide you top notch service. Connect with a coach today