Wealth Building for Dummies: 5 Easy Steps to Winning With Money

Eugene Adams

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Money is one of the most written about topics on the internet. It is easy to see why. Everyone wants more money. 

Thankfully, winning with money is not nearly as difficult as people make it sound. Here are five easy steps that will take you a far way towards winning with money. 

1. Set a Goal 

Would you get in the car and start driving without a destination in mind? Probably not, unless you are joyriding for fun with no real purpose. If you have somewhere to be, it’s much more effective to have a final destination in mind.

With money, you will never reach your goals if you are not aiming for them. You won’t win with money by accident. 

Your goals must have two key components.

1. The goal has to be specific. 

If your goal is not specific enough, it won’t be measurable. “I want to get richer” is a bad goal because you won’t have any idea when or if you achieved it. 

A measurable goal is also a great way to hold yourself accountable. There is no lying to yourself about whether or not you are making progress when you measure your progress. 

2. The goal must be motivating.

It has to be something you really want. A goal you sort of kind of want to achieve won’t work. Motivation levels fluctuate. There will be some days where staying motivated will be difficult. Having a goal that inspires you will help you stay disciplined on those days. 

2. Spend Less Than You Earn

This seems obvious, but you would be surprised how many people fail at this step. You have to crawl before you walk. If you don’t master this small habit, there is no financial strategy that will work for you. 

Make a budget. It doesn’t have to be super detailed. Just make sure that it is detailed enough to accurately measure whether or not you spend less than you earn. 

3. Build an Emergency Fund

Different people have different suggestions for how big your emergency fund should be. Dave Ramsey’s suggestion of $1,000 is a little too small for most people. 3–6 months of expenses seems to be the most common suggestion. 

The size of your emergency fund is not the most important part. The most important part is that you have one. Emergencies happen. They are an unavoidable part of life. You will sleep better knowing you have money saved up for a rainy day. 

Having an adequate emergency fund also eliminates the risk of an unexpected set back dragging you into debt. 

Choose the size of your emergency fund based on your job security and risk tolerance. The more insecure your job, the bigger your emergency fund should be. Also, make sure our fund is big enough that you don’t stress over unexpected expenses. There is no reason to stress about money any more than necessary. 

4. Get Out of Consumer Debt

After you have your emergency fund, you should be sure to tackle any consumer debt. 

Compound interest is one of the most amazing things in the world. It eliminates the hard work part of winning with money. All you need to do is be consistent for a long enough period of time, and compound interest will take care of the rest. 

The problem is that compound interest works both ways. Debt makes compound interest work against you. It is similar to paddling upstream. You will work your tail off and still not make any progress. 

Pay off any credit card debt, car loans, payday loans, etc., as fast as possible. That way, compound interest can be the wind in your sail instead of the chains holding you back. 

5. Pay Yourself First

After you have an emergency fund and are out of debt, you need to start investing. When you invest, it is essential that you “pay yourself first.” What I mean by that is that you should invest before you spend any money on bills or fun. 

This is very important. If you invest at the end, it will be too easy to make a million excuses not to do it. Or, you will invest less because you will overspend on other things. Make building wealth a priority and do it first, not last. 

When you start investing, keep it as simple as possible. Warren Buffet is one of the greatest investors of all time. He recommends keeping it simple and investing in an S&P 500 Index Fund.

I couldn't agree more, especially for beginners. Index funds have two huge advantages. 

  1. They are so simple you can’t mess them up. 
  2. They require no effort on your part. They are completely passive investments. 

What Next?

Once you complete these five steps, you can start to think about getting more complex with your financial strategy. Don’t move on to anything else until you prove you can do the five things above consistently for a good period of time. 

Maybe you might want to look into paying off your house faster. 

Maybe you want to read some investing books so you can invest in different things. 

Or maybe, these five steps are good enough to reach your financial goals. 

The choice is up to you. Financial success is a long journey. It can be as complicated or as simple as you like. Take care of the five steps above, and you will greatly increase your chances of attaining financial success. 

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Certified Personal Trainer | Certified ESL Teacher |I mostly write about all things Southern California, but I also cover national topics.

Los Angeles, CA
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