From the most complex ways to the simplest, we’ve talked a lot about how to build wealth: through saving, through investing, through compound interest… although we also saw how simply saving won’t lead you to financial success.
This time it’s Tony Robbins, author of MONEY Master the Game: 7 Simple Steps to Financial Freedom, who sets it out so incredibly simply that he even makes it look easy. And although some of these tips may seem very obvious, the truth is that in this set of obvious points lies a simple formula for growing our wealth.
In other words, none of these points will lead you to financial success on its own, but apply all 5 at the same time… and that’s another story.
1. Save more and invest the difference.
Saving can be one of the most uncomfortable parts for people. It’s the unfinished business of most individuals, but the truth is that, to start with, it’s the most effective strategy. Cut expenses and be creative about spending less. The extra amount we’ve saved, we invest so that compound interest can do its work.
2. Earn more and invest the difference.
As we’ve seen before, if we’re given the choice between saving and earning more money, we should always choose earning more money. In fact, the key to building any fortune lies in looking for ways to grow our income. Although it may seem hard, according to Robbins himself, if you really set your mind to it you’ll find a way to earn more money; it takes creativity to find it. Once we earn more money, we invest the difference.
(Read: Ideas for making extra money from home or online)
3. Cut fees and taxes, and invest the difference.
It’s not what you earn, it’s what you keep. Robbins is talking about the American market, where, he says, most Americans spend more than half their income on taxes (income tax, property tax, sales tax and so on).
And the truth is that in Spain, for example, the situation isn’t very different. If you play it completely by the book, they squeeze you everywhere. And that’s where the average person hoping to build wealth sometimes needs advice from an expert in this area.
As for fees, Robbins is mainly referring to the commissions we pay on our money, whether we’re talking about savings or investment products. Whatever we save in taxes and fees, we invest.
4. Get a better return on your money.
There’s a huge difference between a 10% return and a 4% return. To give you an idea, with a 10% annual return we’ll double our money every 7.2 years, while with a 4% return we’ll double it every 18 years. That’s a big difference between the two options.
That’s why financial knowledge is essential for our economic health.
But be careful, because we’re well aware that in the risk-return equation many people end up with the opposite effect: by chasing higher returns, they end up losing money.
5. Change your lifestyle.
Maybe you don’t have to wait until retirement to move to a cheaper country or city. Maybe at some point we can sell our highly valued home and buy a cheaper one. The same goes for the car and for certain tech products.
Robbins says it’s all a matter of finding ways to be more efficient with your income and savings and more creative in your way of life. In the end, one of the best investments we can make is in ourselves and our lifestyle.
And these are the 5 simple tips Tony Robbins offers us. Without a doubt, at least the first 4 contain a large part of the secret that has been preached over time. Now, invest the difference.
Further reading
- 6 things the middle class doesn’t quite understand about the rich
- This is the best question for measuring the health of your personal finances
- 11 important things everyone should know about money
Featured image: Ken Teegardin, CC BY-SA 2.0, via Flickr.
