Wednesday, May 21, 2008

Steps to Wealth

So, what should be the first step towards wealth? Personally, I feel that understanding and defining your objective should be the first step. It's a good first step towards anything. Though that brings to mind the question of what is so much of a mystery about money? Haven't most people got a good idea of things by the time that they have their first job and first stable income stream? Only having had once chance to live life, and haven't not stopped to make observations on this topic along the way, I can't really say.
I'm not sure what the key point that so many people miss is. Though I'm sure people are missing something. That's why there's so many people struggling with debts. Understanding what you're doing and defining what you want seems to be an increasingly vague first step. I guess most people understand the basics, but they just don't realize how quickly all the little bits add up. Small payments make things easier, though they're often spread out so far that a sizable amount of the total is interest, something else catches your eye in the mean time and the small amounts add up, or they're spread so far that there seems to be no end to it.
We all largely understand that borrowing costs money, likewise, there's an understanding that having money can bring money. There does however seem to be a disconnect somewhere. Well, my thoughts are scattered so best to move on.
Just as large amounts can be broken down into smaller payments that result in more money leaving your pocket, the reverse is also possible. Taking a large amount and using it to obtain smaller payments works as well, however you don't get anything cool for doing it and it takes a much larger amount. It does indeed take some very large amounts before you start getting big pay offs.
I suppose step two should be bringing spending under control, in general the more that a person earns the more that gets spent, though sometimes there'll be a delay between increased income and increased spending and sometimes spending will increase in anticipation of income increases. Also, I suspect I spend more when I'm not recording every transaction, though since nobody is filling in for me, I really can't say. Most of the time, we don't really think about where all the money goes and try to decide on making major changes.
This brings me to what I suppose step three should be, deciding on sacrifices to make. Someone once asked me when I was going to get a car. The first thing that came to mind was the life cycle cost of having a car. If I got a car now, I think I'd be working about one month a year for it. Not really something that I want at this point in my life.
Then I suppose we can start thinking about increasing income. Now if I could organize my thoughts, maybe I could write something sensible.

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