Learn how to become rich by slowly growing your wealth over time. Get four strategies to build your personal fortune and create financial
security even if you're on a budget.
Money Girl
200 MG Strategies to Build Wealth on a Budget
(upbeat music) Hi friends, welcome back to the Money Girl Podcast. I'm Laura Adams, your host and the author of the new book, Money Girl's Smart Moves to Grow Rich. When you think about people who are rich, Bill Gates or Donald Trump may come to mind, though you might not be able to become as wealthy as them, you can accumulate a small fortune of your own over time. Just realize that having a personal fortune isn't about driving a Lamborghini or hanging out on a yacht all day, although that would be nice. It's about having a secure financial future that can provide for you when you stop working. In this podcast, I'll lay out four top strategies to help you build your wealth and grow rich. To start building your fortune, you don't have to work three jobs or create a huge company with thousands of employees, though that works for some people. The key to building wealth is to focus on slowly increasing your net worth. Net worth is the value of everything you own, minus the value of everything you owe. Here's an example. Let's say you have a car worth $25,000, a bank account with 10,000 and a few household possessions that really aren't worth much. That means your total assets are worth approximately 35,000, but that's not your net worth because you also have to subtract out your debts. If your only liability is a car note with a $20,000 balance, then your net worth is 35,000, your assets minus 20,000, your debt or $15,000. The best way to keep track of your wealth is to monitor your net worth on a regular basis. The idea is to increase your assets, like bank accounts, retirement accounts, real estate, precious metals, businesses and intellectual property and to reduce your debts. In my book that's coming out on December 21st, Money Girl Smart Moves to Grow Rich, I take you step by step through the process of creating a personal financial statement so you can easily stay on top of your net worth. The book is packed with quick tips and one of them is a formula to determine your target net worth for your age. The first strategy to grow rich is to spend discretionary income wisely. Many people have great jobs and plenty of income but have zero net worth. Having good cash flow is fantastic, but guess what? It doesn't increase your wealth if you spend it carelessly on things that don't appreciate in value, like clothes, vacations and nights out on the town. Stars like MC Hammer and Tony Braxton come to mind as extreme examples of people who earned tons of money but didn't end up with anything to show for it and went bankrupt. Hammer burned through something like $20 million and Tony just couldn't make ends meet on $47,000 a month. In order to turn your income into a fortune, you have to use some of it to increase your net worth by doing what I previously mentioned, increasing your assets, reducing your liabilities or by doing both. If you're not sure whether it's better to use your discretionary money to make investments or to pay down your debt, be sure to listen to podcasts number 148 and 149 whether to invest or pay down debt. Grow rich strategy number two, start investing earlier rather than later. They say the early bird gets the worm. That proverb is certainly true when it comes to building a fortune. Putting time on your side can explode your wealth due to one of the greatest gifts math has ever given us compounding interest. Here's an example that says it all. Let's say your goal is to retire at 65 with a cool $1 million. You begin early, like when you're 25 years old, you'd only need to save a little over $400 per month assuming an average annual return of 7%. Paying $400 per month over 40 years comes to a total investment of 192,000. But if you wait until you're 35 to start investing, you'll need to cough up almost $900 per month, also assuming a 7% average annual return. You'd have to invest a total of 324,000 to accumulate a million dollars in 30 years. And if you're a financial late bloomer and don't get started until you're 45, you'll have to shell out over $2,000 per month assuming the same 7% return. My friends, procrastination is expensive. You'll end up investing $480,000 to become a millionaire in 20 years. Comparing these scenarios makes it clear, right? I don't know anyone who'd rather invest $480,000 instead of 192,000 to reach their retirement goal. There's simply no better way to accumulate a healthiness tag than to start early. Even if you put aside $200 per month for 30 years at an average 7% return, you'd amass over a quarter of a million dollars. Time is a critical factor that affects your ability to build wealth. So stop using excuses like, I don't have enough to invest, the market is too high or the market is too low. Remember that waiting to invest is hazardous to your fortune and future financial security. Grow rich strategy number three, protect your fortune. Once you begin to accumulate wealth, you need to keep it safe, protect your fortune by having enough of the right kinds of insurance such as health, life, disability, long-term care, and an umbrella policy. Review your insurance needs once a year with an experienced insurance agent. Grow rich strategy number four, get good financial advice. If you're not sure what your financial goals should be, or if you're unsure how to manage your money properly, spend some time with a financial advisor. They'll help you make long-term plans for building wealth. I seek the advice of a trusted investment advisor who helps me strategize and manage my portfolio. I listen to him carefully, and we make financial decisions together. Unless you win the lottery or have a dear rich uncle, building wealth takes time and happens slowly. But you have to start somewhere. So make a commitment to get started. You'll look back years from now and be really glad that you did. Connect with me on Facebook by going to Facebook.com and doing a search for Money Girl. You can also follow me on Twitter under the username, Laura Adams. If you have money questions, email them to money@quickanddirtytips.com. All this information and more is on the blog at moneygirl.quickanddirtytips.com. I'm glad you're listening. Cha-ching. That's all for now. Courtesy of Money Girl, your guide to a richer life. (upbeat music) (upbeat music) (upbeat music) [BLANK_AUDIO]