23 simple things you can do to become rich

  1. Establish an emergency fund: This should consist of at least 3 months worth of living expenses( not three months of pay). It would be wise to increase this to 6 months worth of living expenses. You could set up a home-equity line of credit( not loan) which you could tap into if the need really arises and you need money for more than 6 months.
  2. Keep the emergency fund in an instant access cash account that pays the highest interest and not in fixed deposits, stock market or bonds.
  3. Pay off all credit card debt before you invest.
  4. Automate your savings.
  5. Pay the least amount of banking fees for your bank account.
  6. Do not have any credit card that has an annual fee.
  7. Invest in low-cost index funds with the lowest annual fees.
  8. Make sure you are not paying ATM fees or late payment fees by being conscious of the rules.
  9. Remember to pay all your bills on time.
  10. Know your credit score and improve it if possible. Check it every year.
  11. Hang on to your oldest credit cards even if you don’t use them.
  12. Protect your identity by signing up for e-mail alerts to change in your credit profile.
  13. When you invest invest some in stocks and some in bonds. Invest in short-intermediate term bonds and index funds.
  14. Don’t anchor your expectations of future returns to the past.
  15. Asset allocation is the most important thing in investing. Value and small stocks can give higher returns but these are not guaranteed in all periods and can have higher costs. A total stock market and a total bond market fund and possibly an international fund is all that most people need.
  16. Rebalance regularly and have set criteria to do rebalancing.
  17. Do not overestimate your ability to beat the market. Hence buy index funds with the lowest cost.
  18. Your asset allocation strategy should weigh the potential cost of losing money as well as potential gain.
  19. If you are investing regularly,  dollar cost averaging and value averaging are helpful strategies.
  20. Do not invest in individual stocks if possible. If you really need to do it, you need to be very good at analysis or you should follow a strategy such as Dogs of the Dow or Magic formula investing, etc. You should have the nerve to stick to it irrespective of how it performs compared to the broad market.
  21. Use tax deferred investing to your advantage by investing your money through tax deferred investing/retirement accounts
  22. Calculate how much you will need for retirement based on today’s dollars. Then use the inflation rate to see how much you will need for retirement when you retire.
  23. Do not withdraw more than 3%-4% from your capital during retirement.





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