Five simple and effective tips for managing your money and building wealth

BY CLEVE DeSOUZA

Any sensible craftsman knows the first step in building a house is creating a blueprint and laying a strong foundation.

The same common sense applies when you’re creating a solid plan for building wealth. You need to follow a blueprint and build a sturdy foundation. Unfortunately, our school systems neglect the foundation and don’t teach kids the basics of money management.

As a result, many of us fail to develop financial literacy and wealth-building skills. We land jobs and go on to buy houses, cars, and boats with little understanding of how money works. Along the way, we discover how easy credit cards make it for us to enjoy exotic vacations and immediately acquire every material good we desire, no matter how expensive.

In the end, we find ourselves in the heart-breaking position of living with thousands of dollars in debt with very little to show for our hard-earned money.

But what if our schools built a foundation and taught us how to avoid that crushing debt? What if we understood how money works for us before we accepted our first job?

It all begins with these five simple and effective tips for managing your money and beginning to build wealth.

• Get your money mind-set right. You become what you think. Instead of worrying about money every day, try visualizing the level of wealth you deserve. Then re-affirm that vision to yourself every day. You’re conditioning yourself to think about wealth so much that there’s no room for worries about money.
• Set goals and write realistic plans to meet them. Yeah, yeah, yeah! I know you talk about goals all the time. But if what you want out of life isn’t written down and backed up by action plans, then you’re just wasting your breath. You’re never going to realize anything you talk about. Written goals and concrete action plans force you to align your money and other resources to achieve your goals.
• Before you pay any other bills, set aside at least 10% of your gross earnings from every pay check. No matter what happens, never waiver from this policy. Does the taxman ask you how much you need for groceries or utilities before he deducts your taxes from your paycheck? Nope. But somehow when we look at our paychecks, we consider our bills first. Treat yourself at least as well as the taxman does. Pay yourself first, and then figure out what’s left for your other expenses. Remember that 10% is your seed money for building wealth. You must invest that seed money and not touch it for daily expenses. A farmer would never plant seeds in the spring, then dig them up in the summer, and still expect to still harvest a crop in the fall. You can’t do that with seed money either.
• Use that 10% you saved wisely. Leaving it in a savings account seems safe, but the money does nothing there. Inflation wipes out any interest you earn. Instead, the bank is investing your money to turn profits for its own investors. That doesn’t help you at all. A much safer (and wiser) plan is to commit to learning everything you can about assets and investments. Then, you’ll understand how to put your money to work for you instead of letting it work for the bank. A good financial adviser can help you get started.
• You work hard for your money, so it makes sense to protect it. If an investment sounds too good to be true, it probably is. Remember also that an investment that offers high rewards also carries higher risks. Conversely, a lower risk investment also delivers lower rewards.  A balanced portfolio needs both high and low-risk investments. Each investor has a different tolerance for risks. Our willingness to take risks also changes throughout our lives. An experienced financial professional will help you learn what risk you’re comfortable with and steer you to appropriate investments at different points in your life.

The best financial professionals provide people with the tools, resources, insights, and accountability needed to succeed.