Think Of Wealth Building Like Planting A Garden

If you’re steady and simple with your finances, you can be fierce and original in the rest of your life. Building wealth comes down to three core concepts; spend less than you earn, allocate a portion of your income to a place that makes money while you sleep and don’t try and overcomplicate things.

Think of building your wealth like planting a garden: it may take a few weekends of clearing away the weeds, ensuring your soil is fertile, and deciding what you’d like to see grow. But once you’ve done the legwork and planted your seeds, most gardeners will tell you: don’t touch it! Let the sun and the earth, the rain and the insects do their thing, and over time your garden will blossom all by itself.

Certainly, you’ll need to do some pruning here and there and some seasons might wipe out some plants, but if you trust in the process and stay safe in the knowledge millions of gardens yield wonderful results each year, you’ll be left with a first-rate sanctuary. Managing money is very similar. It might take a few weekends of setting up some automatic payments, clearing out the cobwebs of debt and thinking about your values (so you know where you’re comfortable investing your money), but once it’s set up, you won’t need to touch it!

Below is the start of a checklist you can use to begin planting your money garden. It’s worth mentioning here, changing your habits and attitudes towards your finances is a powerful step towards becoming wealthy. Not just a rich person, but a wealthy person. So we’ve blended some behavioural checks in with the below strategies. Let’s get planting.

Saving Strategies: Automate Your Finances

Have you heard of Parkinson’s Law? It says: “Work expands to fill the time available for its completion” or, however much time you’ve got to do something is how long that thing will take. This kind of works with money too: you’ll generally spend what’s in your account. So combat this by jumping on the front foot and automatically redirecting your money the minute you get paid.

First: Decide the way you’d like to divvy up your incoming money. Elizabeth Warren and her daughter established the 50/30/20 budget, where 50% is for your needs (including rent), 30% is for wants and 20% is for savings. The Barefoot Investor suggests 60% for Daily Expenses, 20% for paying down debt and saving, 10% for holidays and big purchases and another 10% for fun stuff. It doesn’t really matter how you break it down, it just has to be consistent. Decide what percentage of your pay you can live on (this includes rent), what percentage you’d like to save towards a goal and what percentage you can use to knock off debt/or invest.

Then, log-on to your online bank, open up an account for each portion and set up an automatic transfer so when the money comes in, it automatically gets shifted away from your everyday spending account. It’s miraculous how quickly you’ll adjust your spending habits once you know you’ve got a fixed number for your living costs.

Destroy Your Debt

If building wealth is like planting a garden, debt is like a parasite that eats away at your happily growing plants. This is in no way a shame post for those of us with debt. Credit cards and other bits and pieces are designed to suck us into a sticky cycle of spending just a little bit more than what we actually have.And if you’re not the organised type to dance across various credit cards and loyalty programs, leveraging all the loyalty points, then just avoid the whole thing.

Make a list of all your debts: it could be credit cards, money you owe your sister, a personal loan, a car loan, or your mortgage. And then, from lowest number to highest number, begin paying them down with each pay cycle. And don’t take on more debt during this time. This is sometimes hardest thing when building wealth, because it takes time to actually do. Which is irritating, especially if you’re reading this post, it’s likely you’ll want to get on top of your finances now.

But it’s really difficult to build a garden in one weekend. So just start by just crossing them off the list. One trick is to draw a set of circles for every $1,000 you need to pay back. So if you’ve got a $5,000 debt, you’ve got five circles. Every time you pay off $1,000 colour in the circle. Gamification is a powerful behavioural nudge; we humans like to see things in order. That’s why Tetris (and Candy Crush) are so addictive.

Don’t Buy Crap

Take responsibility for your purchases. Invest your time in proper cleaning, repairing, reusing and sharing your things. Be an owner rather than a consumer. Consumers take, use, dispose and repeat. This pattern that will eat into their savings in a way carefully considered shopping won’t. Owners opt for durability and functionality and will ultimately keep more dollars in the bank. Women are generally very resourceful, so it’s worth turning that innate skill towards your own life.

Invest In The Market

Okay, this is the growth part of the program. Shares are when you give your money to a company for it to use, hopefully generate profit and then return a fraction of that profit back to you. It’s basically a way for you to give money to someone else who can use it in a more productive way than you can. You do this via the share market, which is available using an online broker (there’s probably one attached to your online bank).

Note: there is risk inherent in investing in shares, because the companies might not be more productive than you, and so you might not get as much money back.

But the trick with investing is to work out which companies you think will do a good job of making your money become more money over time. And, yes, this takes time and a bit of practice. Fortunately, there are now instruments that offer you exposure to a range of shares, and rather than return you the profit of one company, you get the average return of all of them. These are called exchange-traded-funds (or ETFs) and they trade on exchanges just like regular shares. Rather than deciding you’d like to own one company, you can own a whole basket of them and your money will move in line with the average of all of them.

If you live in an economy which is growing, then over time that money generally will fold back into the share market. Share markets move up and down all the time, but rather than check your portfolio every day, remember you’re letting your garden grow of its own accord over time. And you get can get on with thinking about everything else other than money!

Main image credit: Alina Hvostikova/ Stocksy United

This report contains general advice. It does not take account of your individual objectives, financial situation or needs. You should consider talking to a financial planner before making a financial decision.