How to Develop a Wealth Plan?

Claire Emma  2019-09-12 18:01:18

While living a life of luxury may be the dream for many people, there is a difference between simply being rich and being wealthy. The rich may have opulent homes and fancy cars, but the wealthy know how to invest the bulk of their money and spend as little as possible. However, the first and foremost thing is to make a plan.

  1. 1Track your spending. Before you can start creating a wealth plan, you need to know where your money is going. Keep a log of all of your spending for at least a month so you'll have a good idea of how much you're spending. The easiest way to do this is to download a financial app that you can connect to your bank accounts and credit cards. It will automatically populate your transactions, and may even categorize most of them automatically as well.
    • 2Review recurring payments. You may have a number of regular subscriptions that you aren't really using. While you're trying to save as much money as possible, cancel anything that isn't giving you any benefit anymore. For example, if you have a subscription to magazines that you no longer read, you might want to go ahead and cancel them.
      • 3Distinguish wants from needs. If you want to create generational wealth, you need to spend as little as possible. This can be difficult and requires some sacrifice. Try to eliminate any spending on frivolous or unnecessary items. For example, suppose you get a cappuccino from the cafĂ© down the street from your office every afternoon. After tracking your spending, you've discovered that you spend $150 a month on cappuccinos. By drinking the coffee at work and eliminating that expense, you've found an extra $150 you can save each month.
        • 4Maximize your income. You're not going to create generational wealth if you're living paycheck to paycheck. You can live a frugal, minimal lifestyle but if you're not bringing in a lot of income, your savings will remain minimal. You should start thinking about your own career, even if it starts out as a side gig and you're still working a regular day job for a while.
          • 5Set monthly savings goals. Once you've got your spending down to the absolute necessities, you should be able to come up with a portion of your income that you can save each month. For example, you might ultimately want to get to the point that you're saving 50 percent of your monthly income. Start by setting a goal of 25 percent of your income the first month, then increase that goal to 30 percent the next month. Increase the percentage each month until you're saving 50 percent of your income.
            • 6Put your savings first. To create generational wealth, you must change your attitude towards saving. Typically, people will spend money over the course of a month and then save whatever's left. You need to save as much as possible, and live on what's left.
              • 7Create a budget. Your budget will determine how much it costs you to live each month, and how much money you're allocating for various needs, such as food and clothing. Set these numbers as low as possible, and aim to come in under budget each month. Review your budget every month and compare it to your actual spending to see how you're doing. You may need to adjust it as your needs change, but make sure you're continuing to distinguish needs from wants.