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Want to become wealthy? Do this 1 thing

Tristan Harrison
Wealthy man with money raining down

Most people reading a website about investing have a goal of becoming wealthy.

There are plenty of things that ‘typical’ wealthy people will do or have done.

They have probably paid down most of their personal debt, maybe all of it. They probably started their financial joruney with a plan. They probably had a budget. They probably invested their most of their capital into growth assets like shares or property for the long-term.

But, there’s one thing that makes the biggest difference to normal people’s wealth: saving.

Sure, if you find Pro Medicus Limited (ASX: PME), Altium Limited (ASX: ALU) or A2 Milk Company Ltd (ASX: A2M) early on in their growth journeys then that will grow your wealth significantly, but saving is the easiest and biggest thing for your wealth.

Every choice you make that affects your finances will affect your long-term wealth. Buying a car you can’t really afford with debt is going to hurt you for years. Buying things you can’t afford on your credit card takes away from your future cashflow. It’s better to not make mistakes to begin with rather than being good at fixing them. There’s a reason why Commonwealth Bank of Australia (ASX: CBA) makes so much profit, Aussies love debt!

Saving $12,000 a year and investing in quality exchange-traded funds (ETFs) is nearly always going to grow wealth to a larger total than someone who invests $5,000 a year and manages to beat the market by an average of 2% or 3% more a year.

Even if a saver only puts cash into a savings account it can grow into a solid amount with how much money is being shovelled into the bank account, but it’s better to invest in growth assets for the long-term.

Foolish takeaway 

Spending less than you earn, living below your means, whatever you want to call it, you can’t send lots of money to your brokerage account for investing unless your budget has the room for it. Saving is key!

The post Want to become wealthy? Do this 1 thing appeared first on Motley Fool Australia.

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Tristan Harrison owns shares of Altium. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Pro Medicus Ltd. The Motley Fool Australia owns shares of A2 Milk and Altium. The Motley Fool Australia has recommended Pro Medicus Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019