Tuesday, 28th October 2008

The practical way to riches, part 1

Written by George Traganidas Topics: Habits, Personal Finance

The Practical Way to riches

If you want to become rich you need to develop certain habits. Being rich is a state of mind and a collection of habits. Money is used to keep count. I have been looking into this area the last few years and I have noticed certain patterns that emerge.

One of the biggest ideas and misconceptions about becoming rich is that rich people are born rich. This is wrong. There are countless examples that prove the opposite, but people think that these are the exceptions. What you must realise is that these people have some habits in common. These habits are not specific to a region/race/gender/age/year. They can be universally applied. In the next series of posts I will discuss these habits in detail.

Habit 1 – Invest your money

Rich people make their money work for them. They do not work for their money. The practical way to do this is to invest your money so it can make more money for you. This is how your money works for you. The key to achieve this is to form a habit of investing. You need to put aside every month some money that will be used for investments.

The amount you will put aside depends on your personal circumstances. People tend to gravitate to a magical number of 10% of your income. I do not know why. What is important is that you set a number as a percentage of your income and put it aside every month. You need to use a percentage, so the money will grow as your income grows. Put aside as much as you can, while at the same time you can maintain your standard of living. There is no point to starve to put aside money to invest

I understand that for some people this percentage might be a few pounds and for some it will be a considerable amount. Do not worry if you manage to put aside little every month. After a few months, it will start to multiply and it will be enough to make an investment. Do not worry at this point where you will invest your money. We will cover this later.

The important thing here is the habit. Set the amount you will put aside each month (it does not matter if it is as low as 1%) and start from now to put this aside. If you think you can increase it, then go on and increase it. Then put this aside every month. If for whatever reason you do not do this for one month (we are all humans, I assume, and something might happen one month) then do not worry. You will not need to save twice next month. You save the normal amount next month and go on. Form the habit and maintain it.

Something to keep in mind is that this money that you put aside is for investing only. You should not use it for anything else. Do not use it to buy a car and then tell yourself that next month you will put the money back. You will not do that and you will start breaking your habit.

Next week I will tell you the second habit.

Follow the practical way,
George

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