Few families pass on actual knowledge about wealth building to their children. Negative feelings of poverty and scarcity can last for generations.
Accountant and financial advisor, Dr. Joseph Simini says, "Most people are illiterate about finance. Finance isn't all that tough. If you want to become financially independent, you can't depend on someone else to do that for you. You have to do it yourself with knowledge."
Dr. Simini started out in life in a poor immigrant family and learned the basics of creating personal wealth from his father's teachings and the school of hard knocks. He manages family owned investments and advises people on the subject of financial independence.
He offers practical advice on how to become financially literate and financially independent:
1. Buy Your Own Home: It is important to buy your own home because with a small amount of money, and a lot of someone else's money, you can get started. Instead of paying rent and making your landlord wealthy, you will be paying into your own mortgage. Eventually, you are going to own the building, leading to tax benefits.
2. Deduct Property Taxes and Mortgage Interest: These items can be deducted from your regular income and that is a big savings. Most people just use their standard deduction, but by adding the property tax deduction and the mortgage interest deduction, you can increase your deduction by thousands of dollars.
3. Save 10 Percent of Your Income: Fill out a budget categorizing all your bills and when they should be paid. At the top of the list of bills to be paid, put your own name. Pay yourself first. Nobody can help you, but you.
4. Make a List of Necessities: Make a list of the necessities that you need to live: rent, mortgage, clothes, food, etc. After this, make a list of the discretionary things. Decide if you really need all the things you are spending your money on. Are they necessary? Can you cut back? These are the financial questions you need to answer.
5. Take Advantage of Compound Interest: One of the most important fundamentals of wealth building is compound interest. Instead of giving you a nice return, compound interest will give you a sensational return.
Compound interest is the interest added to the principle, and then the interest rate is on the new amount of money. Each year it becomes a little more. After years of compounding interest, it becomes a tremendously larger amount of money than if it were only simple interest.
All of these wealth building strategies require awareness and a change in habits. Change your attitude about money. Change your financial habits. Read financial magazines, the business section of the paper, and financial magazines. Know what money can do for you.
Look beyond just employment income. Put your skills and talents to work for you. Create additional streams of income teaching or selling the hobbies you are already interested in. This additional income will give more opportunities for saving and paying the bills. You have to go out and build income of your own.
Avoid putting your money into cash. That includes: a bank account, notes, and bonds. These will only give back a small amount of interest. They are the worst things to invest in.
The stock market has the potential for incredible wealth building if you learn the rules of the game. Do your homework, researching all the information available about investing in stocks. Become stock literate to protect your investment in the stock market. Find advisors and take responsibility for your own choices about your own money.
Do not get caught up in limited thinking. Expand a little bit and take some different actions to benefit yourself financially. This is the foundation of building financial independence. Get yourself started onto the road of financial success by becoming financially literate.
Once you learn the financial principles and practices pass them on to your children. Get your children involved in the basic skills of finances and building wealth. Knowing about money is as important as knowing the ABC's in today's world.
Financial literacy will lead you to additional wealth building techniques. You will be able to come up with a plan that will take you from paying someone else, to becoming the person who other people are paying.
Dr. Proactive, Randy Gilbert enjoys producing the "Inside Wealth Success Show". He presents his insightful interview with Joseph Simini based upon the tips from his book. Hear the entire interview for free by going to: http://www.insidesuccessradio.com/Guests/Joseph-Simini