Here are two sure-fire tips to build your wealth.
One – spend less than you earn.
Two – keep a lid on personal debt. It can be that simple.
People often believe they need to earn a lot to become wealthy, but that’s not always the case. For some shining examples of how big incomes don’t always translate into big wealth, look no further than the world of show biz.
When music superstar Michael Jackson died, he left behind debts estimated at $US400 million. And that’s despite selling around 61 million albums during his career. Movie mogul Walt Disney experienced bankruptcy (reputedly many times) and even legendary entertainer Sammy Davis Jnr is said to have died owing a mountain of money.
The irony is these people made fortunes during their lifetime. How could they earn so much money, and yet not have some left over? A key factor is, they spent too much.
A contributing fact is our expectations and expenditures usually grow in line with what we earn. The bus becomes Business Class, the caravan becomes the Caribbean, and the next thing, if you overspend and/or take on too much debt, the Porsche speeds you into the poorhouse.
Until the global financial crisis hit, many Australians were certainly slipping into the pattern of spending rather than saving, and our collective debt was on the rise.
However an economic slowdown and the prospect of higher unemployment have forced many of us to radically rethink our financial behaviour – and that’s not a bad thing.