Is your personal investing strategy simple enough to where you can explain it to another person so that they understand it? If not, it might be time to reconsider your approach. Most people’s success in increasing personal wealth is equally proportionate to their ability to understand their investing plan.
Let’s face it, most of us aren’t financial experts and there’s no point in becoming one in order to succeed with increasing your personal wealth. Instead, you need a simple plan for personal wealth building and a strong desire to make it happen.
Let’s look at one of the simplest and most effective options you can start with…
The Foundation of Your Personal Investing Strategy
The foundation of any successful strategy for personal investing is to manage your existing cashflow. Believe it or not, every time you spend your money, you’re investing in something. You’re either investing in building your financial security or building someone else’s.
This is why the focus of Powerspending is to spend in ways which will add value to your financial future instead of taking value away from it. This is the first thing to do, before you start investing in real estate mutual funds, stocks or other types of investments.
So how can you start doing a better job of managing your current cashflow? Easy, you can layout a simple plan which will also prepare you for investing your money in things which will yield you a percentage in the future. My personal favorite is the four bucket approach to managing your cashflow. With the four bucket system, you prioritize your spending in these four categories and by these percentages:
1. First 10% to investing
2. Second 10% to giving
3. Third 10% to cash reserves (for emergencies and pre-planned spending)
4. Final 70% to paying your expenses
Notice that the first thing you do is invest, before giving, before paying expenses and before setting aside cash reserves for emergencies and planned purchases. Even if you don’t think you have the money to start investing, start anyway.
One thing you’ll find that marks a profound difference between those who enjoy financial freedom and those who are broke is this: if you invest first and then pay bills, you’ll succeed at personal wealth building.
However, if you pay your expenses first and invest later, “that later” may become never. Most of us are capable of living on only 70% (or even less) than our income if we just make the decision to do so.
Start your four bucket personal finance system today, whether you’re ready or not. It’s simple, and you’re more ready to get started than you probably think.
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