If you want to become wealthy then you just need to do one main thing for your personal finances. Save.
The biggest difference for your money will be how much money you save. If you have enough income then it's easier to save an extra $5,000 a year than it is to earn an extra 2% annual returns from your investments.
There are a number of good phrases when it comes to saving. "Live below your means". "Spend less than you earn". It's true. It's certain that you can make your money work harder by simply spending less, whereas investment returns are uncertain.
When you look at a compound interest calculator like the one from Moneysmart, you can see what a difference it makes. Let's assume your investments return 10% per annum no matter how much you invest. Over 20 years if you invest $750 a month you end with $569,000. If you invest $1,000 a month you get $759,000 after 20 years. It's clear how becoming wealthy can be decided by how much you save.
The coronavirus is certainly causing a lot of difficulty at the moment. But if you're able to keep saving during this time then investing into shares is a really good thing to be doing right now.
How saving can help your investing to become wealthy
Your long-term returns can be boosted when you buy assets at cheaper prices. Good saving allows you to buy more of those assets. Exchange-traded funds (ETFs) like BetaShares Australia 200 ETF (ASX: A200) and Vanguard Australian Shares Index ETF (ASX: VAS) are now much cheaper than they were a few months ago.
High-quality long-term ASX shares like Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), Wesfarmers Ltd (ASX: WES) and Brickworks Limited (ASX: BKW) are also at attractively cheaper prices and can help you become wealthy over time.
