3 Financial Misconceptions That Destroy Your Wealth Potential

There is a universal truth in the world of finances: Everyone has the potential to maximize their wealth – and similarly to lose it all as well.

Admittedly, while it fair to say that those who are born with the proverbial silver spoon in the mouth might have an easier job getting to the money, it doesn’t mean that they are strategically equipped to make the most of their earnings and grow their income. Your wealth potential connects to the mindset and money habits you develop in life.

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As you are about to discover, the ability to generate wealth is not connected to the financial situation you were born in, but, instead, it has everything to do with the way you think about money. Someone who comes from a modest background but understands the financial tips enjoys a broader wealth potential than someone who might have more in their bank account, but fails to grasp the complexity of financial strategy.

You can train yourself to grow your potential.

Focus on erasing these costly misconceptions from your economic mindset first:

Save What Is Left

Of course, everybody knows that savings are indispensable in modern life.

However, there is more than one way to organize your saving strategy. Indeed, savings need to be a planned activity in your budget. Planning ahead means that you can treat your saving funds like other expenses, alongside your utility bills and grocery shopping. Why does it matter? Because saving should never be an afterthought but a scheduled activity.

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Setting up an automatic payment towards your saving account, for instance, can ensure you build the necessary capital for emergency costs. What this means is that you can secure a regular amount of money every month, which reduces the risk of taking on debt to tackle unexpected situations.

Action Steps To Consider

Create a budget, even if that budget is simply on notebook paper.
Separate your expenses between fixed and variable, and take a hard look at your variable spending.
Take steps to cut your variable expenses each month and put the amount you save into a separate savings account.

Fund a Business With Debt?

The idea of taking on a loan when your financial situation is not optimal can be daunting. However, you need to think of the long-term consequences of a loan. For instance, you can utilize a quick solution such as https://www.cashsmart.net/ to maximize your income when you’re in the process of setting your solo business or side hustle activity.

Indeed, a side hustle can let you create a regular source of revenues, which means that your loan is an investment in your future potential. The principle is simple: If the loan lets you increase your earning potential, you may be better off borrowing to set up an income stream in your new business.

High-Risk Tolerance

When it comes to investment, enthusiastic beginners can make a lot of money if they’re ready to take high risks.

However, with high risks comes the danger of losing it all — or even more than you had. As a result, most people stay away from an investment portfolio, for fear that their low-risk tolerance may not be profitable.

In reality, you can make a profit even by taking minimal risks, as seen here: https://www.goodfinancialcents.com/low-risk-investments-options-high-yield/. Something as simple as credit card rewards and bank bonuses can earn you free cash, for instance.

To understand stock investing risk, consider an individual stock or mutual fund’s beta, which measures a fund’s volatility in comparison with the broad stock market, such as the Standard and Poor’s (S&P) 500.

Unlocking your wealth potential is about looking past your financial situation to spend and save smartly. Always plan your strategy ahead.

Ken Boyd

Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies

Co-Founder: accountinged.com

(email) ken@stltest.net

(website and blog) https://www.accountingaccidentally.com/

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