Donít fall behind
Finance charges, interest payments, getting discouraged about your financesÖ all problems that can occur if you let yourself fall behind. Whether itís bills, credit cards, or student loan payments, falling behind can be a very difficult problem to come back from. The more you have to pay out in charges, the less you will have to invest in your future.
If you donít know where you are headed, how do you get there? In order to accumulate wealth you need a plan. Write out your goals, a way to achieve them, and youíll be on your way to an early retirement.
The greatest thing you can do to build wealth is start early. Even if you canít invest much, start with what you can and let your money grow over time. As Albert Einstein said, ìcompound interest is the greatest mathematical discovery of all time.î
Invest in what you know
Whether you are looking to invest in real estate, stocks, or anything else, make sure you know how the investment works. The great Warren Buffett was often criticized for not investing in technology during the dot-com boom. His answer was simple. If you donít know the business model, what the company does on a day to day basis, or how it generates revenue now, and in the future, then stay away from it. This principle can be applied to all types of investing.
Donít do what the crowd is doing
When everyone is starting to get into an investment, that is generally when the smart investors are getting out. If everybody knows a stock is hot, or that their real estate market is booming, it generally indicates a bubble and that itís time to cash out. Investors make money buying low and selling high. If an investment is hot and lots of money is flowing into it, you canít buy low.
Donít try get rich quick schemes
Donít get greedy. This is easier said then done, but donít try to gain too much too fast. Building wealth takes time and hard workÖ there is no easy way to get rich.
This is another one that sounds pretty basic, but can be difficult to achieve. Often times people want the instant gratification and go out and treat themselves. If you have some money burning a hole in your pocket at the end of the month, save it. Think about how nice it will be when that money is working for you rather than heading out shopping.