In order to make improvements to our financial positions, it's necessary to sometimes take a step back and understand where we should be focusing. This time of year provides a great time to evaluate which areas we want to improve in the coming year. Here's a list of items that can benefit all of us. This list at 8th Great Wonder is not your conventional save more / borrow less list. These are new ideas that when put into practice, will help build real wealth.
Increase wealth conversion rate
What's a wealth conversion rate? I made the name up, but basically this is the percent of your income that you're using to enhance your financial position in some way (investing, paying down debt, etc..) The rate is calculated like this;
Income = $50,000
Expenses = $40,000
Wealth conversion rate = $10,000 / $50,000 or 20%
In order for this to be a real wealth conversion rate, the money needs to be staying in your hands and working hard for you (earning interest or paying down debt). Some people may call this your savings rate or investing rate, but it's really the percent of your money you're using to increase wealth in some way. If your current rate is 10%, shoot for 15% - 20% this year. Look for ways to increase income or reduce expenses to meet your goal.
Stay the course if markets drop
None of us know where the financial markets are headed, but they've sure been running up for a long time. At some point there will be a correction and it may very well be in 2020. If it does happen, it'll be important to stay the course and not panic or overreact to what will be a temporary setback. If we're confident in how we're investing and managing our finances, staying the course is always the best option.
Diversify income streams
Many of us, myself included, rely on one source of income. This creates a huge financial risk in the event of a layoff, disability or anything else that could threaten our livelihood. This year is a great time to start thinking about diversifying our income streams the same way we diversify our investments. Let's spread the eggs into more than one basket.
Shop for timeless items
This is a new one for me and I'm really excited about it. I wore a basic navy blue sweater recently and realized I had owned this sweater for about 15 years. It hit me that this sweater never went out of style because plain navy blue sweaters don't go out of style that quickly. When I shop for clothing this year, I'm not going to look for items with the pattern or color that's hot for the moment. Instead I'll look for timeless patterns and colors that don't go out of style for a long time. I'll look for ways to apply this to areas other than clothing too.
Resist the temptation to get rich quickly
Everyone wants to quickly become wealthy, but the more surefire way to wealth is to do it slowly. More
millionaires have been made by living below their means and investing the difference than any other method. So while there might be a hot investment out there, have faith in your plan and continue to execute. Which brings me to my next resolution....
Stay far far away from bitcoin
Everyone is reading about bitcoin millionaires and the seemingly simple path they've taken to wealth. Buy bitcoin, watch it increase by 400% in a few days and sell at a massive profit. That sounds great but remember these two things. First, many of these people will hold bitcoin too long and end up losing money. Second, by the time you hear about how much people have made on an investment, it's probably too late to join the party. Instead, stick to your current plan and execute.
Spend on things that matter and not on things that don't
Rather than simply trying to reduce expenses, I think it's more important to spend where it matters to us and cut back where it doesn't. Life is empty if we're not doing the things we're passionate about with the people we care about. Just be sure you spend where it matters to YOU and not where you think everyone else is spending, or on something you think will sound good to tell people about. What spending truly makes you happy? We're all different people with our own unique priorities. Live life they way YOU want, but cut back your spending that's not enhancing your life. Money is not a means to happiness, but it's a tool we can use to help us find it.
What about you? Is there anything else you want to focus on in 2020? Would other readers find it useful
or entertaining? Share with us in our comments section or contact us and let us know.