Getting rich – a near universal desire that prompts people to do the craziest things in pursuit of wealth. From shady pyramid schemes right through to the most dangerous investments, nobody would turn down a fortune on a silver platter, but sadly most of us will never be offered one in the first place.

The thing is, when broken down to its fundamentals there are really only three steps in the process to build a sizeable wad, but don’t be fooled. While there may only be three steps to speak of, they’re not nearly as easy to follow as they are to read!

Easy as One, Two, Three?

So to illustrate it all in the simplest terms possible, here’s the basic outline of the three things you need to do in order to stack up the wealth you’re craving:

• Step One – Make it

It should be pretty obvious in the spirit of “You gotta have money to make money” which basically means that after you’ve covered the expenses that keep you alive, you need to be able to put some aside too.

• Step Two – Save It

And when you are making enough money to put some to one side and still keep yourself in bread and water, you need to save it up so it actually counts for something.

• Step Three – Invest It

The final step in the process is to make sure that every penny you save works as hard for you as it possibly can, which means making savvy investment decisions.

You see – simple as it gets and vague as anything at the same time.

Making Money

It doesn’t get more obvious than this first step, but it’s all well and good knowing you have to make money, but how do you do it? Most wouldn’t have any troubles at all if they’d already nailed this point, but how can you make enough money to put some aside and keep putting it aside for an extensive period of time?

In this stage, it’s all about targeting earned income you work for yourself, as opposed to the passive income that comes as a result of investments and the like. So with regard to how to go about staking up the necessary earned income, you have to be sure that the path you choose will be:

1. Something You Like – If you’re happy in and passionate about the job you’re doing, you’ll most likely do more of it and do it for longer…leading to more income.
2. Something You Can Do Well – An extension of the above, but also important because if you can’t do something well there’s little chance you’ll be successful enough to make money for the long-term.
3. Something That Pays Decent Money – If you aren’t earning enough to live off in the first place, you can’t save a penny to do anything with further down the line.
4. Something Accessible – It has to be something you can actually get into easy enough and without having to study five years for a degree or relocate half way around the world.

Consider all of the above and you’re well and truly on your way to pinpointing something that can make you the money you need to get started. It isn’t an easy start admittedly, but nobody ever said it would be.

Saving Money

Ok so you’re raking in sufficient money to keep food on the table and gas in the car, but at the same time your savings aren’t going anywhere. Why? Simple really – you’re spending too much of it on things you don’t need to get by. You need to better control your budget – this is both the key and the secret to savings that work, so give thought to the following tips:

• Track it – Over the course of a month…or ideally two or three…track every single one of your expenses using a decent software package. Be sure to note down every little detail and put everything under very specific headings like utility bills, food, luxuries and so on and so forth.
• Separate It – Once you’ve got all the data in front of you, the next step is to separate everything into the things you need and the things you want. The utility and rent bills you might pay for example are needs, whereas trips to the cinema and beers at the weekend are things you want. This is a great way of seeing how much goes out on things that are essentially pure luxuries.
• Cushion It – Never forget that if you can’t cover your basic expenses for the next few months in the case of a health or employment setback, your savings don’t really count for anything. Build at least a small financial cushion into your budget plan.
• Consider It – Be as brutal as you need to be when it comes to ruling out the things that are leaving you with nothing left over. If saving is your priority, you need to compromise in other areas.

Of all the above steps, the most crucial of all is deciding what should be classified as a want and what’s a true need. And when going through the things you need, there are always even further savings to be made.

Could you switch to a cheaper utility provider, or maybe just turn down your heating? Does your car have to use premium gasoline, or can you move down to regular? Or better still, can you walk instead? What about the brands you buy – premium or basic?

Of course, once you really trim the fat down to a minimum and your savings start to accumulate, you can make adjustments and allowances to any extent you see fit – it’s all about getting in the right direction in the first place.

Investing It

And the final step in the process that can of course make or break everything is the investment stage. You’ve worked hard for the money, worked just as hard again to save it so you want to make sure it’s put into the safest of investments you can find…or so you might think.

In reality, you’ll actually have to accept that in order to make your money work for you in any significant way it will be necessary to take some risks. Investing in equities is the way forward for getting your savings turned into serious wealth, which means starting the process with working out exactly what level of risk is appropriate for you.

Step one as recommended by those in the know is to put together an Investment Policy Statement. This basically means to outline what it is you’re gunning for with the investment and listing all of the factors surrounding it like your income, your expenses, tax bracket and so on and so forth.

Step two…unless of course you’re already an expert, which assuming you’re not if you’re reading this…will be to make an appointment with a financial advisor to go through the Investment Policy Statement you made. Here you’ll go over the options and come up with the best asset allocation for your unique case.

And the third step is to go for a range of investments spanning the available markets, rather than trying to time things in your favor and hedging your best all in one place. You’ll need an investment advisor to help you do this effectively, but by spreading your bets you’re effectively eliminating the need to predict timings and also increasing your chances of taking home a return on one investment while another might not be performing so well.

In Summary

Getting rich, or at least staking up a decent wad comes down to the three simple steps mentioned at the beginning that aren’t in any way simple. You need to first make the money, then you need to save it and finally you need to invest it to make sure it works as hard as possible for you. And while the first few parts of the plan are all up to you and the efforts/decisions you make, it’s inevitable that sound financial and investment advice will be needed at a later stage to take the process further.

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