You can create personal wealth. It’s possible to meet your financial goals. By choosing to budget, save and invest, you can pay off debt, send your child to college, buy comfortable home, start a business, save for retirement and put money away for a rainy day. Through budgeting, saving and investing, and by limiting the amount of debt you incur, all these goals are within your reach.
Some people consider themselves wealthy because they live in a very expensive house and travel around the globe. Others believe they are wealthy simply because they’re able to pay their bills on time. What we are talking about here is financial wealth and what it means to you.
Building wealth requires having the right information, planning and making good choices. This provides basic information and a systematic approach to building wealth. It is based on time-honored principles you probably have heard many times before—budget to save; save and invest; control debt; and protect the wealth you accumulate.
Learn the Language
A wealth-creating asset is a possession that generally increases in value or provides a return, such as:
• A savings account.
• A retirement plan.
• Stocks and bonds.
• A house.
Some possessions (like your car, big-screen TV, boat and clothes) are assets, but they aren’t wealth-creating assets because they don’t earn money or rise in value. A new car drops in value the second it’ driven off the lot. Your car is a tool that takes you to work, but it’s not a wealth-creating asset.
A liability, also called debt, is money you owe, such as:
• A home mortgage.
• Credit card balances.
• A car loan.
• Hospital and other medical bills.
• Student loans.
Net worth is the difference between your assets (what you own) and your liabilities (what you owe). Your net worth is your wealth.