When you watch the news or discuss politics with friends, the subject of “the one percent” might come up. As you’ve probably learned, one percent of people now own half of the world’s wealth. Whether you’re impressed by this knowledge or find it alarming, you probably do wonder what the big secret is! It’s true that some people are simply born into wealth, while others build impressive companies from the ground up. These people all typically have one thing in common: Once they become wealthy, they understand how to stay that way.
So what’s the secret? Can you use it to build your own personal wealth? Actually, it appears that wealthy people know a few things that many of us don’t. If you put these principles to use in your own life, they can help you pursue your goals.
Match your spending to your goals. You might imagine people like Warren Buffet enjoying a nonstop spending spree, but in reality, most very wealthy people set goals and then adjust their spending accordingly. While they do often invest money in things that truly matter to them, they aren’t just out there spending money for fun. You might never become a billionaire, but the lesson is the same. Set goals, and match your spending to those goals.
It is pointless to compete with others. There is always going to be someone who has something that you don’t have. Going into debt in an attempt to compete will always backfire, and it’s a pointless exercise in futility anyway. Live within your means, not beyond them. And don’t worry about the neighbor’s cousin’s friend’s boat. Keep your eyes fixed on your own future.
Always be prepared. Wise investors know that nothing is ever guaranteed. Keep some liquid resources set aside for emergencies, and diversify your portfolio. You want to balance your investments so that one setback doesn’t wipe you out completely, or force you to borrow money just to survive.
Tax planning is essential. Wealthy individuals take advantage of every available opportunity to lower their tax liability. Plan carefully, especially with regard to your retirement savings, and you can potentially keep more of your money in your own pocket.
Seek the best advice. Wealthy people all have one thing in common: They are surrounded by smart financial advisors, tax professionals, lawyers, and so on. Consulting with professionals is a good way to navigate tricky financial and legal matters, so remember to seek advice before making decisions.
On that note, give us a call. We can help you with matters such as saving for retirement, so that you can create a strategy for your own financial future.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.