It’s no big secret, but the golden rule to grow your wealth is often the hardest rule to follow of all.
There are many ‘rules’ to growing your wealth and being comfortable with money. Here are several that deserve to be at the top of the list:
- Spend less than you earn
- Protect your assets
- Get comfortable with risk
- Invest for the future
- Minimise your taxes
- Diversify your investments
- Build momentum
- Make it easy
- Cover emergencies
But they’re not at the top of the list.
The number one rule to grow your wealth
The rule at the very top of the list is so basic that it almost hurts to mention it, but if you don’t do this first, nothing else really matters. Here’s the rule:
Do something today.
That’s it. That’s the golden rule to grow rich.
It does seem very simple, doesn’t it? But Warren Buffet doesn’t agree.
“Start early” was the investing giant key piece of advice when asked at Berkshire Hathaway’s 1999 annual shareholders’ meeting how he made his $30 million. Which was his net worth at the time. Today – a mere three years later – his net worth is $100.9 billion. Just sayin’.
“Start early,” Buffett said. “I started building this little snowball at the top of a very long hill. The trick to have a very long hill is either starting very young or living to be very old.”
Do something today
You might already have missed the boat on the “start very young” advice, but if you do something today you’ll be starting as young as you can. And that matters.
The fact is, this golden rule to grow your wealth takes advantage of one of the simplest principals of economics: compound interest.
If you keep investing the interest you make on your initial investment, you earn interest on both the money you’ve saved and the interest you earn. That’s why Buffet’s wealth just keeps on growing faster and faster. Well, that plus a few other tricks the man knows about investing.
Compounding is a powerful tool that anyone can start using – as long as they start. Investing in companies that pay dividends that you then invest back into shares is just one very excellent way to harness the power of compound interest.
Doing nothing means you’re missing out
Fact is, if you don’t something today and get started, you’re missing the boat. You’re maybe even missing the yacht, if building that kind of wealth is your thing.
Even without the mighty compound interest factor, being idle about your money will cost you bucket loads. Currently Australian ‘savings’ accounts are offering a max of 0.50 per cent interest. The average return on bank accounts, high-interest accounts and term deposits over the past 10 years has been 3 per cent.
The average return on Australian shares in the past 10 years has been 6.5 per cent.
Still want to leave your savings in your bank account? The time to at least suss out your options is today, right now. Do something today.
How to get started getting started
The fact is, even though we all want to be wealthy, the reason so many of us aren’t doing something now is because we’re overwhelmed. It’s hard to decide what we really need when we’re being bombarded by messages to want, want, want. It’s hard to know where our money is going when it’s racing in a million directions all at once.
Even if you’ve managed to save a bit, knowing how to maximise it feels daunting. Investing seems so confusing and such a lot. We feel too busy to research all the options and too embarrassed by our lack of know-how to ask someone else.
Huge mistake. If getting started today is top of the rule list, then finding a good financial adviser is up there too. If you lack the time to do the research yourself, at least make the time to book a meeting with an adviser.
No doubt, the first thing they’ll tell you is that it’s a great thing that you called them today.