The only way to increase your savings is to spend less than you earn, or if we want to look at it the other way around, earn more than you spend. The difference is not only lexical but also conceptual, in the first case the focus is on savings, while in the second case on increasing revenues. Here are 5 tips for becoming rich starting from scratch, that is, five tips for earning more, without necessarily having to cut expenses to increase savings.
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The 5 fundamental rules for becoming rich from scratch
As you can easily imagine, there is no magic formula for becoming rich, and to increase your capital reserves, your savings, you need to apply some rules and follow some practical advice. Here are the 5 main ones:
- set yourself goals;
- limit debts;
- investing intelligently;
- increase income;
- avoid scams.
So let’s try to see in detail what these five rules consist of and why, they are not as trivial as they may seem.
Set financial goals
Your goal is to become rich, but to do so it is important to define and set financial goals.
It might seem redundant, but that’s not the case at all. To increase your wealth, in fact, you need to have a precise framework that outlines the path we want to take, what goals to achieve and above all, how to achieve them. It is not enough to say that you want to become rich to become wealthy. We need a method, we need a strategy, we need feasible and achievable objectives.
To identify these objectives we can try to answer a series of questions, and the first thing to ask ourselves is, how long do we want to follow this path? How long do we want to work before we retire and enjoy the fruits of our labor?
We can also ask ourselves what economic goals we want to achieve, for example, do we want to stop working and live on an income? Do we want to accumulate enough capital to be able to buy a second home or start projects? And finally, how do you intend to spend your savings once your work income stops?
All these questions can be reduced to and condensed into “what is the standard of living you aspire to once you stop working?” knowing how to answer this question is essential to be able to define your moves, your objectives and your investment and savings strategy.
Free yourself from negative debts
Debt can be a powerful ally for our investments, if you have a clear vision of how to manage it, there are in fact two types of debt, negative debts and positive debts. The debts you need to get rid of are negative debts, that is, debts with a high interest rate, which negatively impact your capital reserves or the possibility of accumulating capital.
Otherwise, positive debts, “good” debts are debts that can help improve your economic conditions, the mortgage for the purchase of a house for example is a good debt, it is a positive debt because it represents the basis of a real estate investment and, once terminated, it will leave a real estate property with a significant equivalent value. And above all, once paid off it will guarantee a strong reduction in the cost of living.
Invest smartly
Setting aside a portion of your income and allocating that money to your investments is certainly a good strategy for increasing your savings. But, if we want to become rich, we cannot just invest our savings, but we must invest in a safe and intelligent way, invest in the right way.
This means initially investing with caution, not risking too much, reinvesting your earnings and adopting diversified investment strategies, investing in different financial resources and instruments, in order to be protected from possible crises. In this sense, the golden rule of investments is to diversify and not invest everything in a single resource.
Increase your income
This point may seem trivial, but it is not at all, if you want to become rich you cannot limit yourself to spending less than you earn, but you must start earning more than you spend and to do so, you must increase your income.
This is because by earning more you can reinvest more and better, with greater security and this projects you into a vicious circle which, if well managed, can lead to self-sustaining wealth.
In other words, even if in percentage terms a €1000 investment and a €10,000 investment have the same return at 3% per year, in the first case, after 5 years, in the first case we will have accumulated €150, in the second €1500 which we could reinvest.
Avoid scams
By scams we mean those offers and proposals of investments that promise enormous profits in a short time and with minimal investments. Those proposals and offers that promise magical methods and formulas to generate a passive income, without any effort and without any initial investment.
The truth is that if you want to earn you have to invest something, be it work, time or economic resources, something will necessarily have to be put on the table so that we can generate an income and if we want to become rich, we must absolutely avoid wasting resources on scams that they promise to get rich with a snap of the fingers and you have to roll up your sleeves and start working hard.
Men like Jeff Bezos, Bill Gates, Elon Musk, did not become among the richest men in the world by sitting on their couch.
