Ryan Sterling, Senior Vice President at Capital Group, has provided advice to very wealthy clients. Now he shares his tips with us about what you can do to become rich.
Most teens are not interested in financial planning.
When managing money, high school, sports and social activities are priority. It seems impossible to create a budget and save for retirement.
However, life changes quickly and you can be a worry-free teenager and end up with student loans and credit card debt. It can feel like you are hanging on to a thread by living up to your salary and not saving or having a plan to save. It is, in many ways.
This is how Alexa DuPont (founder) and John Moore (founder), felt as adults. Cents Ability is a New York-based non-profit. Despite their college education and having a job, the bills kept them drowned. Moore and Dupont realized they didn’t know how to save money and manage their finances.
Cents Ability was created to assist teens in managing their finances and reaching their financial goals. Cents Ability was my partner and I use their advice in my financial education class at Bronx Youth Center. Although this advice is geared towards teens, it can still be used by anyone who wants to grow and build their wealth.
Building wealth is like any other endeavor. Although it sounds obvious, it is easy to lose sight of the goal as your professional and personal goals gain in importance.
It doesn’t matter if your goal is to save $1 million by 40, buy a house, retire at 60 or start a business in 10 years, it all begins with a goal.
Make a list of your goals and make sure they meet the following requirements: They must be specific, measurable. Realistic. Timely. This exercise will help you identify what you are working towards and make it easier to focus your efforts.
All plans for creating wealth must start with a budget. It’s easy for people to spend too much and not know where their savings are.
To track your spending, you can do a weekly exercise: Write down all of your expenses. You should also save a portion of your budget for savings. You will be amazed at the rapid growth of your savings if you make it a habit to save a set amount each month.
“He owns something,” was a comment a colleague made to me as I was just starting my race. This advice stuck with me until today with a slight adjustment: It possesses things which will appreciate over the years.
Many of the things we buy eventually deteriorate and lose their value. These assets include clothes, appliances, furniture and cars. All of these items are essential for daily living, but we tend to spend too much on “depreciating assets” when we could be accumulating “appreciable asset” which will produce real income and/or increase over time.
You can invest in the stock market, in real estate (both personal or rental), in interest in a small company, and many other things. Important to remember is that you should have at least six months’ worth of living expenses saved before investing in appreciation assets.
Building wealth takes practice and time, just like any other truly rewarding endeavor. Instead of obsessing about your ultimate goal, you should focus on steady progress over time.
Each quarter, I recommend that you prepare a personal balance. This balance sheet will list all of your assets, including cash in savings and checking accounts, your retirement account balance, your brokerage account balance, and the value of your home. Then subtract those assets from all of your liabilities, such as student loans, credit card debt, and mortgages.
You will see steady results over time if you track your progress. This will give you the confidence to reach your ultimate goal. It is important to remember that stocks and other assets can fluctuate from quarter to quarter. You need to be able to control your excitement during rises and keep cool during bear markets.
It is amazing how simple it is to spend money today.
I used to believe that credit cards would make us less savvy, but with the ease of paying online, products arrive the same day and we can use our smartphones or watches to pay, retailers have changed the way we spend money. It is incredibly simple.
Although I love the convenience of modern technology, it is also important to understand that the higher the cost of something, the less likely I am to purchase it. You will be more likely to realize you have enough food in your home if you choose to walk or drive to the restaurant, instead of ordering online.
It is much more likely that you will only purchase the clothing you need if you are willing to go to a department shop to buy it.
Studies show that cash payments are more effective than credit cards. This is because you can see real money moving from your bank account to the seller. Bottom line: make spending harder for you.
A good credit rating can help you get better interest rates for your first home, student loans refinance, or any other purchase that requires borrowing.
Young adults don’t realize how easy it can be to ruin your credit rating. Once damaged, it could take years before you can rebuild it. Your payment history and debt-to-credit ratio are the most important components of your rating. Make sure to always make payments.
This will help you avoid unnecessary and costly interest. It will also lower the interest you will pay on any future loans you take out when you buy valuable assets like a house. You should consider interest rates the cost of money. As with all things, you want it to be as low and as affordable as possible.
Although it is not an easy task, one of the best financial tips is to be honest about your financial situation.
This can be frightening, but it is possible to build wealth without facing reality. No matter if you’re just starting out or are already a millionaire and are afraid to admit it, or are stuck by financial problems from the past and are unwilling to face the truth, honesty is the only way you can move forward.
It would be a surprise to see how willing your friends are to change their plans so you can join them. It’s just like your physical health. If you ignore it, illness or disease can become much worse.
Don’t panic if you feel you are in a financial hole because you have been neglecting your finances in the past. You can make a million-dollar journey by being open about your current situation and where you want it to go. Before you know it you’ll be making progress.