Because there are so many more opportunities to lose your money than there are to make it, one of the best strategies that you can possibly have to build wealth is to focus on your financial loss prevention skills. As long as you keep the following techniques in mind, you can ensure that you’re never left in position where you’re bleeding out more money than what’s absolutely necessary.
Always conduct a risk-reward analysis before taking any financial risks
If you’re about to invest your money into anything, whether it’s a mutual fund or a personal business plan, consider the implication of never seeing that money again and whether or not that’s worth what you stand to gain; if not, you’ll spare yourself the pain of unnecessarily losing money that you couldn’t afford to lose.
Never put all of your eggs in one basket
There is no such thing as a perfect investment, and the banks aren’t impenetrable safety fortresses for all of your money at all times. Prepare for the inevitable margin of error at all times by spreading out your savings across multiple reputable institutions and well-researched funds.
Put function before the feel-good factor
The biggest enemy to your ability to keep an honest budget will always be your emotional purchases. If you’re about to buy anything at any time, consider what the real function of what you’re aiming to buy really is. Prioritize functional purchases over pleasure-based purchases.
Prioritize things that appreciate in value instead of depreciating in value
What many people mistakenly believe to be purchases that will grow in value are actually things that depreciate in value as soon as they’re in your possession. Buying a luxury automobile for no other reason than its appearance will truly only put you in a position where you’ve got something that loses value with every second that passes once you take it home. Do your research to discover investments that will actually become more valuable instead of only becoming even more obsolete with time.
Be wary of recurring charge subscriptions
It’s not just the big purchases that stand to threaten your wallet, but also the small recurring charges that can be difficult to keep track of because of their relatively minor individual impact. Make sure to be wary of signing up for multiple subscriptions to services with a monthly fee that ca add up to amounts that are easy to lose track of over time.