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There’s no magic formula for building wealth and getting rich. It’s simple, really: Spend less than you earn, and save as much money as you possibly can.
But in a world filled with student loan debt, cost-of-living increases, growing inflation and sudden financial emergencies, executing this straightforward plan might sound like a fairytale.
If your goal is to get rich, check out the following eight tips on how you can sidestep the obstacles and maintain your focus. They should help you understand what it takes to build wealth and find your way to financial security.
1. Establish Financial Goals
To get rich, you need to start by defining exactly what rich means to you. Are you dreaming about Jeff Bezos rich, or something more like $1 million in your retirement account?
No two people define rich the same way, so you should set your own financial goals and outline a plan for how to get rich on your own terms. To help shape your goals, here are some questions to ask yourself:
- When do you want to retire?
- What major purchases—a second home, an art collection, a cellar full of fine wine—are you dreaming of?
- Do you plan on starting a family?
- Do you need to save for a child’s education?
- What does retirement look like for you? Downsizing, traveling, vacation homes on both coasts?
- What kind of inheritance do you want to leave for your children and family?
Answering questions like these can help you establish financial goals and decide how much money you need to save in order to fulfill your definition of rich. Then make a budget that lets you get to work.
2. Destroy Your Debt
Not all debt is bad, but high-interest debt is downright terrible if your goal is to get rich. Part of your budget must involve a plan to crush your bad debt and maintain responsible levels of good debt, like a mortgage.
The debt avalanche method is one of the most popular ways to rapidly reduce interest costs and pay down high-interest debt quickly. With this strategy, you’ll put the maximum toward your highest interest rate debt and make the minimum payments on other debts.
Once the debt with the highest rates is paid in full, you’ll roll what you were paying over to address the next highest interest rate debt and pay it off.
While you might be tempted to accelerate paying off lower interest rate debt like student loans or your mortgage, think again. You’ll save more in the long …….