Have you ever seen just how many get-rich-quick books are out there? It has to be in the hundreds of thousands by now, and they all promise to give you the one secret to becoming a millionaire. You would think if they all had so much wisdom there would be a lot more millionaires walking around.
The sad truth is that many of these are just selling a bill of goods. Don’t fall for it. In reality, building wealth is usually pretty boring. It takes consistency, discipline, some common-sense strategies, and a little bit of luck.
You may not be able to control the luck part (although that’s what insurance is for). But you can become the master of your own destiny in many of the other areas. Most people aren’t going to admit that it’s all this boring and simple. But the following four finance tips — that nobody bothered to tell you — really can help you find financial independence.
1. Living Frugal as a Path to Wealth
Hollywood would have you believe that you need some amazing scheme or brilliant investment strategy to build wealth. Sure, that can work. But it’s a high-risk game that creates more losers than millionaires. The easier, more-certain path to financial security is to live below your means, especially when young, and squirrel away some money into investments.
Whether it’s into a 401k, Roth IRA, or mutual funds, compound interest will usually always be the strongest wealth-building tool available to most people. Invest just a little bit per year away during your 20s and 30s, and it will grow and grow and grow. It’s not exciting — but it does work.
2. Insurance is Cheap and Fantastic
There is nothing thrilling about insurance. But there’s a good reason that those doing the best financially rely on insurance so much: it’s relatively cheap and it safeguards you against unlikely but devastating outcomes. Even the best planning and most cautious approach won’t make you invincible.
There is always a chance you’ll face a catastrophe, and the smartest among us recognize that and work to be prepared. So load up on all the insurance you can get, and pay special attention to your health and life insurance policies for the ultimate security against the unknown.
3. Credit Is Powerful — If Used Responsibly
Some advisors tell you to avoid debt like a plague. Others say credit cards are powerful and will help you build your FICO score from an early age. Who is right? Both of them! Having access to credit is great and you can use it skillfully to help you get ahead in life and business.
On the other hand, careless debt taken on with no strategy or valid reason is almost always detrimental. The key is to get a good credit card with excellent perks and use it responsibly. This way, you get all the benefits and avoid the potentially ruinous downside.
4. Nobody Will Ever Be Impressed
Many people believe they need to buy expensive things to show off their success. What’s the sense in getting an MBA and working at a financial institution if people don’t realize that you’ve “made it?” Unfortunately, that isn’t how it works. You can over-extend yourself to buy a car that’s $20,000 above your price range. You can buy more house than you should. You can forever try to keep up with the Joneses. OK, some people might see it and feel good for you.
But, ultimately, nobody really cares. They won’t see you in an entirely different light and forever consider you a success. That’s all psychological. So don’t waste your money to impress people who will never actually be impressed. Buy nice things — for you — if you want. But only do it when you can actually afford it rather than risking your family’s security for the approval of people who really don’t even care.
The Real True About Building Financial Security
A lot the popular beliefs about getting rich are myths, misconceptions, or outright lies. The best path to financial security and independence is usually a lot more dull for most people who can’t rely on an inheritance.
You get a good job, live reasonably, invest in stable funds, and wait for the money to grow. Get insurance to protect against the things you can’t prevent. Use credit wisely and responsibly to get ahead and build your FICO score. And don’t worry about what other people think.
It may sound too good to be true. Or it may sound too boring to be true. But when it comes to finance and getting ahead, boring really is the best way to win the race.