How to Accumulate Wealth

The term ‘wealth’, like the term ‘affluence’ sounds sweet to the human ear. Everyone has a dream of accumulating wealth. Everyone dreams of security so that they can put away their worries regarding job security or medical bills and live comfortably in their old age. For this, you need to know how to accumulate wealth.

However, many of us forget that we don’t have to accumulate wealth, but have to be careful and shrewd about managing the wealth we have. Here are some simple steps on how to accumulate wealth.

Never Accumulate Debt

  • Debt does nothing but ensures you that the money is being transferred from you to the bank or your credit card provider. The first thing that you must realize is that if you want to build wealth, you must have a net surplus every month (spend less than you earn). However, if you are borrowing then you are using your next month’s income for paying the current month’s consumption. This means that you are not only spending more than you earn, also you are ensuring that your next month’s balance is even worse by eating the income.
  • Other than this, even the interest keeps piling up. Always remember that compound interest will work strongly against those who are in debt. If you continue in this fashion then you will find out that your debt payments have increased and you are struggling for money to survive leave alone get wealthy.
  • The first thing you will have to do is get rid of the debt. There are many articles that you will find to get rid of debt, so just bite the bullet and follow those instructions. Once you become debt free, you will be in a place where you can start accumulating the wealth.

Emergency Savings

  • These days everybody needs emergency savings, even those who have secured jobs. There are many things that keep happening in life, like your car breaks down, you get sick or you lose your job. You must always have some emergency money kept aside form a minimum of a six month salary.
  • Always keep the emergency money in such a place that you can access it. If you have saved money for the year’s emergency account, then you must put half of it in an instant access account and the remaining half should be in the notice accounts so that you can pay a higher interest. However, always remember that you must never touch the emergency cash unless you are facing an emergency.

Retirement Funds

  • Everyone gets old and once you reach that age you will find it difficult to work, since your body will not permit you. Therefore, start saving from now for your old age. If your employer offers you a company pension scheme, which he is contributing for, then you must go ahead and join it.
  • There are many people who refuse to this offer because they don’t want to be stuck with that company for a long time. if you get into the company scheme then make sure that it does not get invested as the shares of the company you are working for. This is very risky because if your company is in trouble then your retirement fund will be in danger and you will end up loosing everything.
  • Other way to save the pension is to open a personal pension or individual retirement account. These will vary in rule, but will come in tax breaks, which will be a valuable boost for the funds. In Europe, you are not permitted to touch your pension fund until you are retired, so you must understand that the money you put in will be for a long-term investment. Therefore, it is best not to touch the retirement money until you retire.

Diversification

  • Always remember that you must never put all your shares in one company or even in a single sector. You must always diversify across all categories of investment. In this way, if something tends to go wrong with one of your investments, it won’t wipe out your portfolio. Keep in mind that investing in shares is a long-term business. You must never use it for short-term funds as you won’t like to be forced to sell things in unfavorable circumstances.

Monitor your Investments

  • Most people have a tendency to look in the ‘passive’ system, where they can put their money away in shares and completely forget about it. This will simply make dividends and growth while they are enjoying their life.
  • Practically this never happens. Only a few shares will work consistently for years. For this reason, you will have to monitor your shares and look for signs that can’t be good for investing anymore. If you are not sure about the company’s prospects then sell a portion of shares. Always remember that no one can make a profit with every single investment. If you are making profits nearly 60 percent of the time then it means that you are doing well.

Wealth is the most important thing for humans. So, make sure you invest wisely.


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  3. How to Calculate Pension
  4. How to Calculate Net Asset Value
  5. How to Calculate Enterprise Value
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