It is reasonable to assume that you desire financial success for yourself and your family and you may even have your sights set on becoming fabulously wealthy. What ever your goal, unless you win the lotto, you will not move past average unless you fully understand the elements that contribute to wealth. There are no deep dark secrets about becoming wealthy, known by a select few. All you need to do is log onto Google and type in the words ‘how to get wealthy’ and you will see literally millions of sites telling you what you have to do to become the next squillionaire. The problem is that we often make mistakes along the road and these mistakes can take huge chunks out of our resources. So here is a list of the 6 most common mistakes that we make. Knowing how to avoid them could mean the difference between riches and poverty in retirement.

There is plenty of evidence to suggest that your beliefs and attitudes towards money and wealth are laid down by your parents. If your parents believed that the only way you could make money was to work hard for 12 hours a day for 45 years, and only lucky people become wealthy, chances are you have adopted some of those beliefs yourself. If they drummed it into you that being self employed was way too risky, and having a ‘steady job’ was the way to go, you may feel compelled to hug the corporate ladder. This being said, it does not take much research to discover that these beliefs can be changed. So while you may have been indoctrinated to some extent, you do not have to subscribe to other peoples beliefs. Many entrepreneurs were spawned by conservative parents; they just chose to do things differently. So before you embark on your journey to build wealth have a close look at your attitude and beliefs towards money and take steps to develop a wealthy mindset. 2 No Plan: Once you have decided that you want more for yourself than a pay cheque to pay cheque existence, you need a plan in order to execute your goals. As the adage goes people don’t plan to fail, they fail to plan.' This is particularly true when it comes to building and maintaining wealth and securing your income sources. People often adopt an ad-hoc way of planning their finances with no real strategy behind their goals. The trick is to identify what you think will make you money, develop the skills to help you achieve excellence in your field and keep learning. Once you start making money you need to learn how to retain it and then invest the money so it starts working for you. The world of investing is not complex, however the sheer volume of products available and their respective functions, can be difficult to comprehend. For this reason you need to use the services of a financial planner to help you structure a strategy. The plan should include everything from short, medium and long term savings, life cover, health cover, income protection, short term risk insurance and disability insurance.". It may seem like a tall order but covering all the bases is a vital part of becoming wealthy.

3.Insufficient Diversification: Diversification is generally considered a key to reducing risk and enhancing potential return. Business owners often make the mistake of pinning their retirement prospects on the eventual sale of their business. This is a huge gamble given that 85 % of all businesses don’t make it past the 5 year mark. Entrepreneurs should conduct their finances in the same way as an employed individual, and this means taking on a mix of investments. True diversification means investing in different asset classes like property, structured investments, stocks, fixed interest products, bonds and cash and they should have varying lengths of maturity. With a well-diversified portfolio, you are never too dependent on how well one product or asset class performs.

4 Insufficient Life Insurance: We are quick to insure our cars, homes and even cell phones, but too often we overlook our most important asset - ourselves. With bonds, school fees and bills to be paid, it is important to have proper coverage on all income earners in the family. Some people may have group term life insurance through their employers, but this alone may not be sufficient. Be careful not to be overly dependent on group term, for these plans can be inflexible, and sometimes insufficient. Look into purchasing individual coverage to suit your particular needs. Your life cover should be equal to ten times your annual income plus any debt that you might have. So say for example you earn R25,000 per month, you have a bond of R600,000 a car loan of R120,000 and credit card debt of R10,000 then your life cover should be R3.73 million rand.

5. No Disability Insurance: Another overlooked element of financial planning is Disability Insurance. Your ability to earn is what keeps your family secure. If you can’t work your entire family is at risk. The risk of disability, as, well as its potential cost, is simply too great to ignore. Once again, a company-sponsored plan may be too limited for your needs. You will want to study the policy carefully to understand all of the provisions, including the definition of disability, the waiting period following disability before you can collect and the length of the payment period.

Having no medical cover can turn the best financial plan on its head. Even a relatively minor motor accident can set you back R100,000. A serious accident can cost in the millions. Even if you can’t afford a plan that has the bells and whistles at least have a hospital plan in place.

7. Estate Planning: Some people have the impression that estate planning is just for the rich. Unfortunately, that view can be costly to their heirs. Your estate includes such items as your home, cash, investments, personal property, and other assets you and your spouse may own jointly or as community property. These may add up to a lot more than you thought you were worth. Estate taxes can eat away at your assets and your heirs could receive far less than what you had anticipated. You owe it to your family to have an estate plan in place. An effective will, a trust arrangement and adequate life insurance are some of the options available to help your heirs get what they deserve. Consult your tax, legal and financial advisors for help in putting together an estate plan.

Article Source:www.skills-universe.com

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