The team begins the podcast by discussing how wealth is something that can be hidden. Someone who is rich and lives a nice lifestyle, might not actually be wealthy. Being wealthy is the byproduct of good financial habits that people create over their lifetime.
4 Steps to be Wealthy:
Build up enough emergency reserves
Save for retirement
Create an opportunity fund
Many Americans have some type of debt. You have to make sure you have a spending budget, and a plan to attack the debt. Our net worth is reduced by the amount of debt we have. Assign a purpose to every dollar that you earn, and eliminate all unnecessary expenses.
After debt is eliminated, you need to focus on creating an emergency reserve. This reserve is typically around three to six months of expenses. With this reserve in place, you can withstand market fallout or any surprises that come along the way. Once you reach your savings goal for your emergency reserve, you don’t need to keep adding to it.
Saving for Retirement:
Pay yourself first is a very simple budget system where a percentage of your income goes straight into an investment account before you get paid. Through investing and compounding interest, you can have a sufficient rate of return that will build wealth, which at some point in time you can turn around and pay yourself with.
Once you know you are on the right track with saving for retirement, the next step is to create an opportunity fund. This fund can be used for purchasing a rental property, a second home, or other investment. This fund allows you to get creative with how to invest your money and build wealth going forward.
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