Whatever your definition is – in a financial sense, anyway – there are some thing that we do that simply detract from our ability to become wealthy or simple generate more money. If we want positive results, we should consider taking on some characteristics and behaviors that might help us get there.
Beyond those generalities, it helps to actually take action. That’s the thing, sometimes it takes an attitude of moving forward without trying to be perfect. In other words, action beats inertia. Better to actually take steps to improve our financial situation and build wealth, rather than plan and hope to do it when the timing is right. Why not now?
With that it mind, I’ve come up with a list of 10 actions that can help build wealth:
1) Prepare Personal Financial Statements
Businesses need to generate financial statements. Two common ones are a balance sheet and an income statement. A balance sheet is a snapshot of assets, liabilities, and equity – with a resulting net worth figure. An income statement documents income and expenses, showing a profit or loss.
Why not take a view of our personal balance sheet and income statement? Do this for a given time period – say, the last year – and you can get a good idea of where you are financially and where you’re going. Having an idea of your current net worth, and the relationship between income and expenses (in other words, are you saving) is vital to being able to make progress in the future. We need to be informed!
2) Be Honest With Yourself
Are you really on track to be okay financially? Can you see yourself saving enough money for retirement, based on your current financials (as noted above)? It’s important to avoid sticking our head in the sand like an ostrich, and instead face up to the facts as they are. If we aren’t doing it already, we need to try to remove all bias and assess ourselves honestly. If it isn’t possible to do so, maybe a professional or simply someone you know who’s very financially savvy can give you the straight up lowdown on how you’re really doing.
3) Set Long-Term and Short-Term Goals
These goals should be specific instead of vague. Giving ourselves a target to aim for has a way of aligning our behavior accordingly. This concept has applications in many areas of course, but in this case, we can of course say that it’s quite relevant in terms of finances.
I like the concept of long-term goals that are ambitious. Now, we also need to be realistic, in that some of what we plan for needs to account for the so-called “unexpected” things that inevitably happen in many lives. After all, life is rarely a linear straight line pointed directly to success. Rather, we want to trend upward, realizing that there might be some peaks and realistically, a few valleys too. But let’s aim high.
Short-term goals are great because they are a way for us to quantify our progress toward long-term goals. Just like a 26.2 mile marathon is a long journey, it’s still make of 26 individual miles, and that additional fraction of a mile too. Success at each step along the way will help us reach the bigger target.
4) Genuinely Try to Exceed Expectations at Work
In my experience, employers seem to group people in four groups:
- “Exceeds Expectations” (EE) group, which is maybe the top 10%.
- “Solidly Meets Expectations” (SME) group, which is probably the next 50%
- “Barely Meets Expectations” (BME) group, which might be the next 30%
- “Not Meeting Expectations?” (NME) group, which is probably the next 10%
It’s best to be in the top 2 groups. If you’re in the SME group, you’re doing a lot of the heavy lifting, and might have a decent level of job security. But if you’re in the EE group, you have more job security, and upward mobility as well. That’s where the money is.
5) Build Your Professional Network
Lets say you had two really good candidates for a job, both of whom interviewed well. But one has great personal recommendations – and the other one doesn’t. Who would you rather hire?
Knowing people matters. It helps you learn, understand what’s going on, and might help you get the edge when looking for an opportunity. Build your network when you don’t need it, then it will be there when you need it. And we should be willing to help others too, as it goes both ways. Generosity in this way, without expecting anything back directly, can be a good thing anyway.
6) Increase Your 401k Savings Rate
If you’re already maxing it out, then save more elsewhere. If you aren’t participating in your employer’s program – or other investment vehicle – then try to start. Whatever the case might be, it’s important to save, save, and save some more.
7) Make Savings Automatic
If savings are automatic, it accomplishes a couple of things. First, it makes it easier to handle than constantly making separate decisions and investment amounts. Second, it forces you to simply live on the remainder. Even if you’re starting out very small with savings, making it automatic can facilitate your living without it and maybe even not noticing it. To the extent that we can grow the difference between income and expenses, the better off we’ll likely be. Even if that means making saving money a habit just like brushing our teeth is a habit – we can’t imagine not regularly doing it!
8) De-clutter, and live more simply
I’ve seen first hand the effects of having too much stuff. My parents accumulated so many things over the years, and when they had to move, there was so much clutter. Some of it was sent to storage. Now, I’m cut from the same cloth, honestly. However, I’m now trying to move to a mindset of purging things that aren’t used for a long time, and being practical more than emotional about holding on to certain things. Particularly things that take up space and are never used. There are carrying costs, in terms of either use of space or storage costs.
Additionally, there can be money made by selling certain things. It’s amazing the kind of market there is out there for some things many people don’t want or use anymore. Might as well get some money and use it to either pay off debt or invest it.
9) Get Healthier
If you’re already in great shape, then maybe its a matter of keeping that way. But many people could stand to make a few changes in how they do things, as the results of taking shortcuts or making small bad decisions can show up later in life.
If we aren’t healthy enough to work productively, we will be hard-pressed to build wealth or prevent erosion of wealth if older. Plus, health problems can be quite expensive for people. Regardless, to the extent that we can make healthy decisions, we are putting the odds in our favor for living a more satisfying life. And one with more wealth!
10) Practice Not Caring About what the “Joneses” Think
I really think that one of the multiple factors that could get people into trouble financially is the concept of keeping up with the Joneses. Some of these people are “Big Hat, No Cattle” people with their money. Meaning, they aren’t really what they appear to be, as they are all image and no substance.
Who really cares what others think? I’m starting to care less and less, as I realize that it’s so unprofitable. How does it matter to me what others have or do?
I think a good way to practice this is to almost go out of your way to curb any competitive impulses, and just be yourself. When I was younger, I would buy really good clothes. Stuff for work was from Nordstrom, and things I wore on my personal time on weekends were really kind of nice as well. I cared a lot about it.
Not that it’s a bad thing, as there is value in putting our best foot forward. Appearance can matter in many circumstances. But these days, I have no problem just wearing whatever I feel like wearing. Today, as I write this, I realize that I was out shopping at a local mall in jeans and an $8 sweatshirt, with a t-shirt underneath that I picked up for less than $1. As a younger person, I would have quietly laughed at someone my age dressed like this. Today, I WAS that person dressed like that and I simply didn’t care too much what anyone thought.
Bottom Line - these are all action-oriented steps that can help us move toward building more wealth. Personally, I’m applying each and every one of them this year.
My Questions for You
What are your thoughts on this list?
Do you take any of these 10 actions regularly?
What else do you do to help build wealth? Anything else to add?