My man ESI from ESIMoney.com makes a return today to share his tips on what to really focus on in order to grow our wealth exponentially. You might remember him from his previous post that went viral on the 10 things he didn't expect in early retirement, which he's still very much in and still very much enjoying. Thanks for taking the time, good sir!
We all have money tips coming out our ears. Do this. Don't do that. Do this or that. And on and on… The advice seems endless. So much so that if you try to follow them all you'd end up with no time to actually live your life.
At the same time, all money tips are not created equal. While many are valuable, there are some that are exponentially better. These are the tips that will make you wealthy.
So let's get to the good stuff and cast the rest aside for now. Based on the experience of managing my own money — allowing me to accumulate a few million dollars and retire at 52 — here are my recommended ten big financial moves that will propel your wealth skyward!
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1. Get an advanced education in a valuable field
College degrees can add significant wealth. There's no debate that (on average) the more education you have, the more you'll earn and the less likely you are to be unemployed.
And if you can keep debt low while getting the degree (and there are reliable ways of doing this), then it's almost guaranteed that getting a college degree is a good deal.
Even better is getting a degree in the right field. It's well-known that certain careers pay more than others. Pick one that is closer to the top than the bottom and you're finances will thank you for it.
Consider this finding: College graduates earn $1 million more than high school graduates over their lifetime, and the income gap between the highest-paid college majors and the lowest-paid is more than $3 million dollars.
To make even more, get an advanced degree in a high-paying field. This is where the big money can kick in.
I got an MBA by spending a grand total of $5k for six years of college (because I was willing to work during school and got good grades). My MBA was worth an extra $1 million to $2 million, even though I only worked until I was 52. If I had stayed employed into my sixties you could take on a few more million.
Of course, you have to factor in abilities and interests when picking a career. But most people have at least a handful of fields that would work for them. If they select one which pays a bit more, they will be making a solid financial decision which can help them become quite wealthy over time.
2. Focus on growing your career
Even if you don't pick a vocation in the highest-earning field, your career is a multi-million dollar asset. If you don't believe me, take a starting salary of $40k, add in 3% annual raises over 45 years, and look at the result. You'll have earned $3.7 million.
Even better, you can manage your career to get those 3% average raises even higher. Doing so will help you earn millions more throughout your career.
Take the same numbers from above and instead of 3% raises use 8.16% raises. The difference is over $10 million!
Think it can't be done? I averaged 8.16% increases for 28 years using seven steps that grow any career. Plus, it took me years to figure out the seven steps. You don't have to go through that trouble, so you have the potential to do much better than I did.
Of course, 8.16% could be considered on the high side. So let's go low. Let's say you average 4% annual raises. That extra 1% will allow you to earn an extra $1.1 million more than what 3% raises would.
Any way you look at it, managing your career for income growth will have a huge impact on your finances.
3. Control spending
No matter how much you make, you can spend it all. We don't have to look far to find examples. It's almost a cliche that high-income actors and sports stars go bankrupt. People who have made millions somehow spend it all and then some. As a result, they are often left with nothing (or less).
A bit closer to home, you can see this principle play out across our country.
The median American household annual income is $51,939. U.S. households median net worth is $80,039. This means that over a 40-year period at an 8% return rate, the average American is saving a paltry $310 a year. What are they doing with all the rest? They are spending it!
On the other hand, those who control their spending do much better.
Assume a family can save $5k per year (less than 10% of their income). In 40 years at 8% they will have a net worth of $1.3 million. See what even a little bit of saving can do over a lifetime?
And this doesn't mean you have to save on EVERYTHING, just some things. Enjoy your life by spending on what you want here and there, just keep it in line so you have excess to save and invest. Even 10% will make you wealthy over time.
Personally, I wanted to do better than average and was able to save 36% of my income. Others have saved much more. If we can do it, so can you.
There are two major areas to control spending: on the big things, and on the little things.
Big things like homes, cars, extravagant vacations, and the like can bust your budget in a single move. Little things like eating out for lunch regularly, smoking a pack of cigarettes daily, and, dare I say, drinking $5 cups of coffee several times a day don't seem like much, but they can add up to big dollars over time.
See the rest of the story at Business Insider