In a video posted on the YouTube channel The Financial Diet, which she co-founded, Chelsea Fagan presented eight points about accumulating wealth that are rarely discussed openly.
Fagan stated that small purchases like a weekly Starbucks latte or an impulse buy at Marshalls are not the primary obstacles to building wealth. "It's not because you buy avocado toast once that you're not going to buy a home," she said, advising people to examine their major lifestyle expenses instead.
She warned against lifestyle inflation, where increased spending follows rising income, often leading to debt. "A lot of Americans are living beyond their means," Fagan remarked.
Automating savings was highlighted as a key strategy. "One of the key aspects of saving money is automating so you don't have to think about it," Fagan said. She suggested treating savings as a fixed cost that increases with earnings.
Fagan noted that wealth often generates more wealth. "Having money makes it easier to make money," she said. "Wealth begets and perpetuates wealth." She added that self-made wealth can also compound, and maintaining wealth becomes easier at a certain level.
Increasing income is more crucial than cutting expenses, Fagan argued. "You can cut expenses as much as you want," she said. "But at the end of the day, unless you're making enough money to actually save a significant amount from cutting down expenses, it is much more crucial to focus on earning more." She pointed out that in times of high inflation, earning an extra $1,000 monthly through a side hustle is more effective than saving $50.
Certain industries, like tech and finance, offer advantages such as annual bonuses for investing without dipping into savings, Fagan mentioned. She recommended considering roles in these sectors for bonuses or stock options.
A long-term investment strategy is essential, Fagan emphasized. "You need to make sure that your money is invested during the most lucrative days, which are pretty much totally unpredictable," she said, noting the stock market's historical recovery from turbulence.
On homeownership, Fagan challenged traditional views. "Despite the age-old boomer advice that renting is just throwing your money away, or the people who treat owning a home as crucial to long-term wealth building, not only is that not always true, in some cases it can work against you," she stated. She suggested renting can be a smarter financial choice in certain situations.