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How to Build Wealth

Posted: March 2nd, 2010 | Author: | Filed under: Money Management, Personal Wealth, Wealth Management | No Comments »
In an era of new fiscal responsibility, where we all are suddenly awake and realizing that we don’t want to repeat the same mistakes again, thinking about our own financial health has become a very central concern.  For some, it’s a fixation, and a rather unhealthy one at that.  That’s likely because there is so much attention on this area, and so many horror stories circulating, that we’ve become a little paranoid.  Some of it’s certainly justifiable, but reason should always have the throne.  Let’s have a look at some of the basic principles, then, in building wealth.

Economics runs in patterns and waves that are often very similar to patterns that are found in nature.  Nature like diversity, and this is a very good principle to tie to personal wealth.  In nature, diversity means excitement, rejuvenation of the species, and the invention of innovations that help us to survive, and even thrive.  When investing, as a general rule, diversify.  This does not mean throwing your money in the strangest places to see what happens, but is rather more like putting eggs in different baskets.  The eggs are still very fragile.

One of the most common pieces of advice on this, and again, there is a counterpart in nature, is to start early.  The early bird gets the worm, and those who start a brood early will have a larger family when they are older, and this is also true for money.  It makes mathematical sense as well, where the percentage of your investments that earns does grow over time, so investing very early makes excellent financial sense.  It also helps in building up a nest egg, so that you have a little cushioning if things get tight later on.

The last piece of advice is to use common sense.  Again, those who can do this in the natural world are likely to stay alive longer.  Don’t take unnecessary risks.  Don’t drag along debt that you can’t afford to carry.  And don’t be afraid to appear overly cautious.  In this particular game, there are those who can afford to play recklessly, but it’s not worth the risk.

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