10 steps to financial wealth.

Author:Constable, Carie
Position:Personal finance

I reviewed my financial situation a few years ago, and it was not a pretty picture. I was making very good money (mid-five figures), but I had created a mountain of debt that had begun to erode my cash flow and my enthusiasm. Many companies, including my own, were positioning themselves (reengineering, downsizing) so that they could be more competitive in an ever changing marketplace. While the changes in the economy and technology were evident, I was relatively unprepared financially.

Money doesn't come with an owner's manual, and most folks don't learn about it in school. Instead, people pick up tidbits here and there from friends, family members and co-workers. The two rules everybody learns, of course, are that "money is hard to come by" and that "it doesn't grow on trees." Neither piece of advice is particularly useful.

Becoming prosperous involves more than stockpiling cash in your bank account; it requires that you change the way you think about money. Whether you earn $20,000 or $200,000 a year, here are some winning money strategies:

  1. Pay yourself first. I used to send every penny I earned to credit card companies-and life was miserable. Once I developed the habit of saving every month while still paying my bills, I was much happier-and my debts were reduced. The idea is to save first and spend what's left over. The best way to do this is to make savings a part of your monthly expenditures (assuming you do indeed have a monthly budget).

  2. Save at least 10% of your gross income every month. If your company offers a 401(k) or 403(b) plan, this is one of the best places to begin. This money is set de for your retirement income (not for a new car or vacation). You may want to save at least 5% for short-term goals and the other 5% for the long term.

  3. Don't use credit to purchase nonproducing wealth items. Don't buy television sets, stereo systems, furniture or even finance vacations on your credit cards. These items lose value rapidly. You ought to stick to borrowing money when it can be used to acquire appreciated assets, such as a home, rental property or commercial real estate.

  4. Take risks. You shouldn't throw caution to the wind and invest your money foolishly. But you should be willing to take risks by putting your money in stocks or mutual funds, not under your mattress or in a Christmas club account.

  5. Diversify...

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