The Eight Fundamentals of Building Wealth

To begin the process of becoming wealthy, you must first determine exactly what being wealthy means to you. Are you hoping to become as wealthy as Jeff Bezos, or more realistically, to have one million dollars in your superannuation account? Or, are you simply hoping to have enough money to reduce the amount of time you spend working and have more time to devote to pursuing a passion or a hobby?

Because no two people have the same standards for what constitutes wealth, you need to devise your own monetary objectives and a strategy for how to become wealthy according to your own standards. These questions, which you should ask yourself in order to help shape your goals, are as follows:

• When do you hope to call it quits?
• Which life-changing acquisitions, such as a second home, an art collection, or a wine cellar brimming with the best vintages, are at the top of your wish list?
• Do you intend to start a family in the near future?
• Do you need to set money aside for the education of a child?
• How do you envision your golden years playing out? Consolidating belongings, going on trips, buying a second home on the coast
• What sort of legacy do you hope to leave behind for your offspring and for the rest of your family?

Finding the answers to questions like these can assist you in establishing financial goals and determining the amount of money you will need to save in order to achieve the level of wealth that you consider to be rich. Then create a spending plan that will allow you to start working.

There are some good kinds of debt, but if you want to become wealthy, the worst kind is the kind with a high interest rate. Your financial plan should include a strategy to pay off all of your poor debt and keep your good debt, such as your mortgage, at a level that is manageable.

One of the most common and effective strategies for rapidly lowering interest expenses and rapidly eliminating high-interest debt is called the debt avalanche method. Using this method, you will put the maximum payment toward the debt that has the highest interest rate and the minimum payment toward all of your other debts.

When you have finished paying off the debt with the highest interest rate, you will then apply the money you were paying toward the debt with the next highest interest rate and finish paying it off.

Do not give in to the temptation to pay off debts with lower interest rates more quickly, such as student loans or your mortgage; instead, give it some more thought. If you pay off the debt with the higher interest rate first, you'll end up saving more money in the long run. After that, you should focus on paying off your mortgage and any outstanding higher education loans, such as HECS-HELP.

Establishing and maintaining an emergency fund is an essential component of any successful financial plan. This is not your stash of Bitcoin (BTC), nor does it consist of shares of Microsoft stock. It is rather highly liquid cash that is easily accessible within a savings vehicle that carries a low level of risk and is funded at levels that protect you from the need to incur high-interest credit card debt in the event of an emergency.

It is recommended by many financial experts that you have an emergency fund that can cover at least three to six months' worth of expenses, but the actual sum of money that you require to feel secure could be higher or lower. In either case, you should establish an emergency fund, maintain it in a savings account that garners a high interest rate, and ensure that you replenish it after you withdraw money from it.

If you put off making investments for too long, it will take you much longer to become wealthy. It is not sufficient to just save money. If you want to become wealthy, you need to put your money to work by investing it in various markets.

Generally speaking, there are two ways for average people to get their feet wet in the world of investing: one is through a taxable brokerage account, while the other is through a tax-advantaged super account.

Check out our guide to share trading platforms if you don't already have one of the aforementioned as part of your financial toolkit. It should help you get started with taxable investing in the event that you're not already doing so.

It's possible that you already have one of the latter in your life, as it's likely one of the primary benefits that your job provides for you: a superannuation account. You may wish to make additional deposits into your superannuation account at the tax-friendly rate of 15% (up to a certain threshold), in addition to the contributions that are made by your employer.

It is not an easy task to educate oneself on how to invest, but the time to start doing so is right now. Do not let the process frighten you; instead, begin with a modest investment, make use of the educational resources that are offered on the aforementioned platforms, and keep in mind that the single most important thing is to continue making consistent deposits into your investment accounts.

Related: Top Default Pension and Superannuation Funds for 2023

If there's one thing that investors should take away from the crypto market crash of 2022, hopefully it's that they shouldn't put all of their eggs in the same basket. That is also known as diversification, which is one of the most important ideas in the world of investing.

When you first start out in the world of investing, one of the most important things to keep in mind is that a diversified portfolio is absolutely necessary on the path to financial success. It protects your wealth from the large wipe-outs that are possible when you only own a single type of asset, whether that asset is cryptocurrency, yesterday's hot stock, or the latest wonder investment your neighbor told you about.

To create a diversified portfolio, you need to have a solid understanding of asset allocation, which involves investing your money in a variety of different asset classes that are in line with your objectives.

When you're younger and have more time to build wealth, you can afford to make investments that carry a higher level of risk because you have more time to bounce back from the inevitable downturns in the market. If you want to keep the wealth you've built up as you get older and as you get closer to reaching your idea of what it means to be rich, you should invest in assets with lower levels of risk.

Learning about investing on your own is the most efficient way to amass wealth, but you should also give some thought to working with a financial advisor who can assist you in managing your investment portfolio.

If you start making more money right away, you'll be able to realize your ambition of becoming wealthy much more quickly. Increasing your potential earnings today helps you build a virtuous cycle of earning more, investing more, and getting closer to your goals. This cycle can be continued as long as you continue to work toward those goals.

It's possible that the easiest way to increase your income is to seek promotion in your current position; however, if that's not in the cards for you, don't be afraid to consider changing careers: after all, the job market in Australia is strong at the moment, with unemployment at record lows. You can increase your earnings in a number of ways, including:

• Keep track of your accomplishments and use them to bolster your case for additional compensation.
• Seek out mentors who can guide you through the process of developing the skills necessary for higher-paying positions.
• Enhance your capabilities by attending classes or pursuing further education.
• If the steps outlined above aren't feasible, you might want to think about switching careers to find a job with higher potential earnings.

You can boost your income in addition to your primary career path by engaging in a side hustle or starting a small business. A side hustle does not have to continue indefinitely, but it can be a great source of additional income that can assist you in reducing your debt or increasing your investment budget.

Related: the top ideas for earning passive income in 2023

If you want to become wealthy sooner rather than later and its acronym stands for "financial independence, retire early," the FIRE movement is something that you might find interesting to learn about.

Followers of the Financial Independence, Retire Early (FIRE) investing philosophy make it a priority to minimize all costs to the greatest extent possible in order to free up the greatest possible amount of capital for investment purposes. For instance, a FIRE practitioner would forego the ownership of an automobile and ride a bicycle everywhere, no matter the weather, in order to save money that would otherwise be spent on auto loans and insurance.

This is an extreme example, and we wouldn't really want you to give up owning a car even if it were necessary in this situation. But some of the movement's rules of thumb, such as the rule of 25, which states how much money one needs to have in order to achieve financial independence (also known as "getting rich"), could be useful.

Before you can retire early, the rule states that you need to have saved 25 times your annual expenses. For instance, if you spend $35,000 per year, you will need to set aside 5,000 in savings.

You can become wealthy more quickly with the help of FIRE strategies than you might be able to without an aggressive savings plan. This list of FIRE blogs can help you learn more about the movement if you are ready to give your plans for building wealth a significant boost.

There is a good reason why the word "scheme" is typically used in conjunction with the phrase "get rich quick." The reason for this is that there are almost no quick routes to financial success, and anyone who tries to convince you otherwise is probably trying to con you into giving up your money through some kind of scam.

As was just discussed, being wealthy requires having a clear vision of what you want and the self-control to go after it no matter what it takes. This whole process takes time, but it is possible, and it is well worth the effort. Create a strategy for accumulating wealth, commit to executing that strategy, and you will start to see results relatively quickly.

If you overhear someone saying that they have a "sure thing" and that you "can't lose" with it, get as far away from that person as you can as quickly as you can. Know that nothing is certain, very few things happen as quickly as you'd like them to, and that getting rich is the reward for a well-executed plan that requires patience on your part. With that in mind, just be patient.