Start the Habit of Building Wealth - With $50 Per Month
By Howard Feigenbaum
Fifty dollars a month is not a lot of money in today's world. A cable television subscription is substantially more expensive. There are discretionary items for which you unthinkingly spend money that do not increase your net worth. In fact, they reduce your net worth. That is not to say that one should live a Spartan life. Entertainment, travel, hobbies, and sports add to the quality of your life. However, discretionary spending will not help you create wealth.
The dictionary defines the word "habit" as a pattern of behavior that is acquired through frequent repetition. Random attempts at any endeavor rarely result in success. So it is with wealth-building. People who are successful in building their net worth have a pattern of behavior that helps achieve the desired result.
"The longest journey begins with a single step," a profound sentiment attributed to Lao-tzu, the founder of Taoism, focuses on two important concepts: (1) beginning the effort and (2) reaching the goal. Patience and determination are essential qualities for building wealth. But nothing happens without the first step.
It isn't necessary for the first step to be a large one; a small first step works very well.
A mutual fund that has an Automatic Investment Plan will allow you to start the investment habit. Why should you start investing with a small sum like fifty dollars? Because you can afford fifty dollars. If you are new to investing or if you are hesitant to take investment risk, beginning with a smaller sum will add to your comfort level. You can always increase the amount later or you can stop. Your initial amount risked is small.
The Automatic Investment Plan creates the repetition necessary for the formation of a habit. Once the habit has begun, it becomes easier to continue. Each month an investment deposit will transfer from your bank account to your mutual fund account. If you ever wish to change the amount, merely call the mutual fund company or your broker.
Staying with your wealth-building habit depends on your tolerance for risk. At the onset of the process, there should be an honest evaluation of your goals and how much risk you are willing to take. If your investment is outside your comfort zone, you will not have the patience to endure market changes. The road is not always easy. Most people have a low tolerance for volatility. The steep downturns of a volatile investment are especially discouraging. Having a conservative investment at the core of your portfolio will add stability and will keep your anxiety level lower.
Once the fifty dollar a month habit has begun, your learning and experience will contribute to a calm assessment of your progress. In the fullness of time, you will look back with a new perspective that allows you to recognize how far you have traveled on your wealth-building journey. The "first step" in Lao-tsu's famous adage will seem like a distant speck on the horizon. The most difficult part of the journey is summoning the initiative to begin.
Howard Feigenbaum is Registered Principal and Owner of Sharemaster, a Broker-Dealer firm that specializes in monthly dividend income funds.
"Do you know the only thing that gives me pleasure? It's to see my dividends coming in." - John D. Rockefeller
This article is a general discussion of the subject and is not intended as a solicitation or specific investment advice.