I believe there are a number of important rules that Aussies should follow to help their wealth grow over time.
Some of wealth-building is down to luck. But a lot of it is down to the process you use for your money and the systems you put in place.
I think these important rules are worth following to help you build wealth:
Spend less than you earn
I think one of the most important rules for building wealth is making sure that you spend less than you earn, that you live within your means.
It's easy to spend a lot of money. It's harder to earn more. The trick is to make sure that your spending isn't consistently more than your income. If you earn $100 a month more than you spend then you can build your wealth over time. If you always spend $100 a month more than you earn then your net worth is going to head downwards until interest and debt overwhelm you.
How are you supposed to know if you're spending less than you earn? By tracking of course! I'm sure whichever bank you're with would offer some personal finance tools whether it's Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB) or another one.
Plenty of people use another tool to track their finances like Excel, Google Sheets or even Zip Co Ltd's (ASX: Z1P) Pocketbook. I use Excel.
Budgeting can be a really powerful tool to help you save money.
Be intentional with your savings
Spending less than you earn is a good outcome of your hard work and financial choices. But I think it's important to come up with an intentional system for your money.
Some people like the idea of saving money first and spending what's left after that. If you're aiming for a long-term savings goal, such as a house deposit, you need to make sure you're actually putting that money aside into a savings account rather spending it.
Even if you just save $100 or $200 a month, it's important to classify money not spent that month as savings. Keeping it physically separate in a savings account is a good idea. Otherwise you could just end up spending it a month or two later.
You can really start building good savings habits if you just make it into a routine to save money (like a fitness routine). As Warren Buffett said: "Chains of habit are too light to be felt until they are too heavy to be broken."
Have an investment plan
No-one has a crystal ball to be able to tell you when share prices are going to fall or rise. It's impossible to predict. A year ago I don't think anyone would have seriously predicted that a global pandemic was about to happen.
I think it's important to regularly invest into your portfolio. It doesn't matter whether the market is up or down. It doesn't matter which side of politics is in power. Don't worry much about the latest GDP or house price statistics. Investing regularly will make sure your wealth-building plan stays on track. It could be once a month, once every two months or even once a quarter. Just commit to regularly investing.
What shares would make good regular investments? I think some exchange-traded funds (ETFs) would be good ideas like Betashares Global Quality Leaders ETF (ASX: QLTY), BetaShares Global Sustainability Leaders ETF (ASX: ETHI) or Vanguard Msci Index International Shares Etf (ASX: VGS).
I also think that listed investment companies (LICs) and trusts (LITs) can be good for regular investing. I like ideas such as MFF Capital Investments Ltd (ASX: MFF), Magellan Global Trust (ASX: MGG), WCM Global Growth Ltd (ASX: WQG) and Future Generation Global Invstmnt Co Ltd (ASX: FGG).
