The Key to Creating Your Own Wealth Creation Plan

The number of people who don’t dream of becoming wealthy are few and far between. While money isn’t everything, it sure does make life easier. Both having too little and too much money can create problems, but wouldn’t you rather have problems with too much money? I’ve looked all over the world at different methods or claims of creating wealth. It’s a shame that there are so many people out there who are using the method of telling someone how to become rich to become rich themselves. As an honest person, I cannot tell you any guaranteed way to become wealthy. Quite honestly, there is no magic formula for doing so because everyone will have unique experiences as part of his individual circumstances. That said, I’ll share with you the techniques I’ve used to construct my own wealth plan. It’s something I’ve created an acronym for: LACED™. The LACED principle is fairly straightforward. LACED stands for:

Leveraged
Automated
Compounding
Ethical
Duplicable.

If you create a plan using all these principles, you’ll likely have a strong plan.

I’ve heard many wealthy people speak about leverage. Basically, you’ll want to use as much leverage as possible to build wealth. You can do so by utilizing vehicles that allow you to control large assets with smaller assets. One example of this is buying an investment piece of real estate with 10 percent down. This is incredible leverage if you think in terms of the fact that you can control $180,000 worth of property for $18,000. In some cases you may be able to control real estate with absolutely no money down! Another example would be buying stock options. In this case you purchase the right to buy or sell stock, but not the obligation. This is a highly risky proposition and should not be tried without extreme due diligence and some understanding of how options work. Suffice it to say that with options you can control 100 shares of stock (one contract) for a small fraction of the price of the underlying security. By the same token, a small movement in the right direction on the underlying security can magnify the value of the option considerably.

Next, you should try to automate as much of your plan as possible. Anything that doesn’t require you to actively work on it will free your time to build greater momentum toward your wealth goals. The Internet has greatly enabled strides in this way. Consider how quickly you can buy and sell stocks online, research real estate information, or even sell products completely online through an automated payment process. You can automate your purchase of shares in a 401(k) or start purchasing stocks using DRPs (know as drips), which allow you to buy portions of shares if you have less money at a time to invest. More conservative but somewhat effective still is to simply have a portion of your paycheck put into a savings account. Putting your wealth creation on autopilot will help you stay on track without having to think about it.

Compounding is one of the most powerful tools we can use to build wealth. There are a lot of different strategies for compounding. You may want to reinvest profits in your business to grow the business larger. You may reinvest your returns in the stock market to grow your portfolio more quickly. The more you are able to make your existing assets work for you, the faster you will propel yourself toward wealth. Some common ways to use compounding are compound interest earned on savings accounts, CDs, stocks, or that 401(k) you contribute to weekly. The pivotal interest rate you should try to achieve is at least eight percent because at that rate and higher the accumulation is significant enough to fight off inflation.

Some might say that doing things ethically is more of a moral choice than an actual tool for wealth creation, but I will counter with the fact that every major religion on earth I’ve studied has in some way said what goes around comes around. In other words, if you cheat, eventually you’re going to lose. Deal with everyone honestly, and you’ll get wealthy more quickly. An interesting take on this is something many people won’t think about. When you don’t have a lot of cash, you don’t want to spend money on CPAs, attorneys, or other professionals to help you grow your wealth. You’d like to have their services, but you don’t want to pay the price. This isn’t ethical. You wouldn’t want to give your labor away, and yet you feel they should. This is where those ethics are really going to make a difference! You get what you pay for, and if you try to be cheap, you’ll very likely get cheap advice. Additionally, you may think you are getting over on your employer by slacking off at work when the boss isn’t around or by “borrowing” company supplies for home use. The reality is that by doing that, you may very well get passed over for that promotion that could put an extra $5000 a year in your pocket. Do what’s right!

Finally, you want to make sure the core components are as duplicable as possible. If something works one time, it may get you a large gain, but if it doesn’t work twice, it may give you a huge loss the second time around. Many of my mentors have told me that a lot of small gains are much better than having one big home run. Don’t fall prey to the guy at work who gives you that “can’t lose” stock tip. Don’t put all your eggs in one basket. Diversify your funds to protect them. Most of all, don’t throw more money at an investment that isn’t giving you returns. If you bought a stock at $5 a share and it’s selling at $2.50, don’t think it can’t sink lower. If your 401(k) lost five percent last year, switch plans.

Find things that leverage, compound, and are as automated as possible, and then pick those that are duplicatable, and you will have an astonishing wealth-building machine in place. Don’t wait until later because time is your most valuable commodity. Always pay yourself first. Whether you are employed or an employer, a janitor or an oil tycoon, these principles will still apply.

I hope you can take this lesson and build your own wealth plan with it. It may sound vague, and it is, but I believe it holds all of the secret ingredients you’ll need to work your way toward having your wealthy future all LACED up!

** This article is one of 101 great articles that were published in 101 Great Ways to Improve Your Life. To get complete details on “101 Great Ways to Improve Your Life”, visit http://www.selfgrowth.com/greatways2.html.