Have you heard about the invisible rich? These are the people whose lives are anything but flashy—they drive older cars, pack their lunches, live in a modest home, etc. At the same time, they’re making five-figure donations to their churches and sending their children to college without borrowing any money. Just how does this happen, and how can the rest of us get on board?
First, it’s worth acknowledging that money like this can come from an inheritance or other source that drops a lump sum into your bank account. However, it doesn’t have to, and regardless of whether you receive a big cash payment or build wealth over time, the rules for maintaining it are the same.
1. Invest in yourself by completing your education.
Numerous studies have shown that people with a college or graduate degree significantly out-earn those with a high school diploma over the course of a lifetime. How significantly? As much as half a million dollars or more, depending on a variety of life factors. Put in financial terms, your education is an asset that cannot be wiped out in a market crash.
2. Pay off debt as quickly as possible and live within your means.
Regardless of the reason you’re in debt, it’s critical to move forward by paying it down and avoiding new debt. Recall that the invisible rich don’t drive fancy cars or have the biggest house on the block. When your spending is under control, you can focus on the big financial decisions that have an outsized impact on your overall net worth.
3. Prioritize saving.
Saving is a top financial priority for the invisible rich. They consistently save and invest 15% of their income, which takes careful planning to accomplish. If saving that percentage isn’t feasible, look at your options: you can either raise your income or lower your expenses to hit the target. When a cash bonus or windfall comes your way, put it into savings or invest it rather than splurging. There’s no silver bullet that will make you a successful saver: it’s all about discipline and deferred gratification. By having a target percentage of your income that you’ve committed to save, you can develop the habit of paying yourself first.
4. Keep time on your side.
The second secret to successful saving is to invest early and take advantage of compounding interest. One obvious place to start is with your employer’s retirement program. Are you taking full advantage of the employer match available to you? This is free money you shouldn’t pass up! Investing can be intimidating if you haven’t purchased stocks, bonds, or mutual funds in the past, so look for a trusted advisor who can mentor you as you learn. Again, keeping time on your side when investing will generally yield the best results, particularly if you’re risk-averse.
You don’t need a get-rich-quick scheme or exciting business opportunity to build wealth—remember, if it sounds too good to be true, it probably is. Instead, focus on the things you can control: dealing with debt, limiting spending, paying yourself first, and starting your nest egg as early as possible.
To keep you motivated, it helps to clearly articulate your dreams, passions, and goals so you can remember what you’re working so hard to accomplish. We’ve created a free download to help you clarify what you’re saving for and put your financial priorities in order. Click the button below to access it now.