In investing for building wealth, there are some pitfalls to avoid and some rules to follow. Otherwise, you will be into an abyss of debt, not knowing how to get out of the debt trap created by the urge to spend through the credit cards, personal loans and what not. We need to remember the following things for our better financial health. 

Don’t fall behind 

Finance charges, interest payments, getting discouraged about your finances… all problems that can occur if you let yourself fall behind. Whether it’s bills, credit cards, or student loan payments, falling behind can be a very difficult problem to come back from. The more you have to pay out in charges, the less you will have to invest in your future. So, as and when the payments fall due, pay them. Now, how to pay? You know when they fall due right? Make a plan and timetable of what are all the payments falling due and when. Then, estimate what are your sources for the payments. Try to clear the deficit by working hard or collecting old debts etc. Essentially, this means budgeting. Budgeting will help you in evading the debt trap. 

Set goals 

If you don’t know where you are headed, how do you get there? In order to accumulate wealth, you need a plan. Write out your goals, a way to achieve them, and you’ll be on your way to an early retirement. 

Invest early 

The greatest thing you can do to build wealth is start early. Even if you can’t invest much, start with what you can and let your money grow over time. As Albert Einstein said, “compound interest is the greatest mathematical discovery of all time.” 

Invest in what you know 

Whether you are looking to invest in real estate, stocks, or anything else, make sure you know how the investment works. If you don’t know the business model, what the company does on a day to day basis, or how it generates revenue now, and in the future, then stay away from it. This principle can be applied to all types of investing. 

Don’t do what the crowd is doing 

When everyone is starting to get into an investment, that is generally when the smart investors are getting out. If everybody knows a stock is hot, or that their real estate market is booming, it generally indicates a bubble and that it’s time to cash out. Investors make money buying low and selling high. If an investment is hot and lots of money is flowing into it, you can’t buy low. 

Don’t try get rich quick schemes 

Don’t get greedy. This is easier said than done, but don’t try to gain too much too fast. Building wealth takes time and hard work… there is no easy way to get rich. 

Save more 

This is another one that sounds pretty basic, but can be difficult to achieve. Often times people want the instant gratification and go out and treat themselves. If you have some money burning a hole in your pocket at the end of the month, save it. Think about how nice it will be when that money is working for you rather than heading out shopping.