The Most Critical Wealth Factor
By [http://ezinearticles.com/?expert=Frank_Alof]Frank Alof
The most critical wealth factor is this: Produce more than you consume.
The wider the gap between what you produce and what you consume, the greater will be the possibility of increased wealth for you. If you spend all that comes in for you as income on a consistent basis wealth creation will be far from you. However if on the other hand you delay immediate consumption of all that you produce you are more likely to be moving toward the accumulation of wealth over time. Of course how you apply the surplus that results is vital to the way your wealth will grow; do you gamble it away, or do you invest it in say the stock market or some other profitable venture?
How do you produce more than you consume?
One of the simplest ways of doing this is by cutting down on your expenses. You can certainly start your wealth-building this way. Before every expense ask yourself these two questions: "Do I really need this?" and "Can I pay less to get it?" Don't go for trendy label that will cost you more. Resolutely restrict your credit card spending. Determine to discipline yourself to resist every avenue that seeks to remove your money from your pocket. You need to be able to say 'no' to enticements and to give up some of the unnecessary luxuries. If you're not willing to do that, then you wouldn't be able to turn your financial life around.
The other side of producing more than you consume is actually to make more money. If you increase your earning and keep your spending unchanged, you'll immediately move from living paycheck to paycheck to spending less than you earn. One easy first step is to look for things you no longer need and sell them off for cash. Another step is to actually look for work to do part-time or take a bold step to start a small business of your own. While working at a job, you can do things in your spare time to earn extra money.
How do you utilize the surplus (i.e. the difference between what you produce and consume) in order to grow your wealth?
The thing to do with your surplus fund is to put it to work so as to grow it. You do this by investing the money. You need to invest so as to keep the value of your money from inflation. The money you have today will not have the same value tomorrow. Inflation decreases the value of money. Investing your money in avenues with high return than the rate of inflation will make the value of your money grow.
Every investment has some level of risk, going from low-risk to very high-risk. Finding the safest investment requires understanding risk, your comfort levels and finding investments that have performed well historically.
Note also that while the return on your money is important, the safety of your funds is more important. So go safe in your investing.
The financially intelligent person produces more than he or she consumes. By following the above plan you can come to wealth and secure your financial future. Even a low paid person, applying this principle will get into financial freedom than the rich who consume all they produce.
When you have surplus money to invest, you want to make sure it is a safe investment that can yield a return. By combining all the right elements you can get the best investment results.
Ultimately by spending less than you earn and putting the surplus to work by investing it, instead of using it to purchase things now, you end up having several rewards. You can build income for retirement, earn steady passive income, and even go on to build up funds for future investments and business endeavors. The simple strategies discussed above can help you achieve these effectively.
Frank Alof is an online writer on various topics including insightful guides on overcoming debt and money problems. To learn more about money matters go to: http://www.amazon.com/dp/B007CIEMBQ
Article Source: [http://EzineArticles.com/?The-Most-Critical-Wealth-Factor&id=6963520] The Most Critical Wealth Factor