Money makes more money. But there’s another important ingredient in growing household wealth – discipline in money management. Find out how self-control and restraint play a big role in boosting family income.
Start Saving Early and Regularly
Families need savings to start building wealth. In general, the one-third savings rule is quite useful – use one-third of the income for daily expenses (food, transport, fees), one-third for entertainment (treats, movies, gifts) and save the remaining one-third. Deposit savings on a regular basis. Those who lack the discipline to set aside a certain amount of their income should arrange to have an amount automatically debited from their salary into a separate account. This will leave some money untouched.
Pay Bills on Time
Make sure utility bills, insurance premiums and credit card bills are paid on time. Again, automatic or direct debit is useful here. Set up direct monthly repayments from a bank account whenever possible to avoid late payment charges.
Pay off as Much Debt as Possible
For credit card bills, avoid paying only the minimum monthly repayment. Instead, strive to pay off the full monthly amount or as much as possible. This is because credit card debts charge higher interest than personal loans or any other forms of loans. Families who find themselves in financial difficulties should always clear their credit card debts first. Some may even need to resort to cutting up their credit cards to prevent the debt from getting bigger.
Allow Time to Build Wealth
Although a handful people do get rich quickly, for example by striking lottery, inheriting a fortune or owning shares with very high rates of return, the reality is that most wealthy people accumulate their wealth over time and through hard work and good financial planning.
Don’t let greed or impatience get in the way. Instead, let the power of compounding – the effect of reinvesting the earnings from an investment, do the job. Choose an investment with a reasonable rate of return. The longer the money is left with the investment, the more benefit will be reaped eventually. In short, slow and steady is one of the best ways to ensure that the money will make more money.
Keep Abreast of Business News and Financial Market
Knowledge is power. Even if the family has a financial planner, it helps to know what is happening in the financial market. Make time to read the business pages of the daily newspaper and pay attention to business news on TV, radio and the Internet. Financial magazines often carry insightful articles and updated news on investments, property, taxation and superannuation. Books on money management, family finances and investments are very useful too. Visit the local library to borrow these financial reading materials if buying them is a tad tough on the wallet.
Discipline is instrumental in money management and growing household wealth. To boost family income, learn to save regularly, pay bills on time and pay off as much debt as possible. It’s also important to allow time to build wealth and know what is happening in the financial world.