Three simple ideas to help you get richer

Here are three easy ways you can reach your wealth goals.

When it comes to reaching your wealth potential, a small number of ideas do 90% of the work. The majority are simple. Keep a budget. Use lists prolifically, for such things as tracking spending or preventing impulse shopping when buying groceries. Protect your family from financial ruin if you die. Those sort of simple ideas.

But here I’m writing about three key wealth-building and wealth-protecting ideas in depth.

1. Avoid the ‘too-good-to-be-trues’

If something sounds too good to be true, it is. Most people insert the word “probably” in there, but since we're bombarded until we die with such schemes, if you always act on the basis that it's definite, you'll be richer in your lifetime. Perhaps you'll miss the one opportunity in 10,000 that was legitimate, but more likely you'll avoid the 9,999 that were either scams or plain bonkers.

Get-rich-quick schemes are easy to spot once you have a feel for them, but be constantly on your guard for less obvious ‘too-good-to-be-trues’.

Take the so-called 'protected' products your bank manager sells when you go to cash in an inheritance cheque. These are fantastic-sounding accounts that might promise all the returns of the stock market or all your money back if share prices fall. It sounds too good to be true, and that's because it is.

These are far from the generous or safe products they can easily be made out to be. Although you're not likely to be wiped out by them, their hidden costs and risks are usually too high to make them worthwhile. Avoid them and you'll likely swerve a rip off.

Other traps are also hard to spot. Anything promising you 1,000% returns is obviously a scam, but you may be surprised to know that even a company insisting you'll get 15% a year is to be avoided. Those sorts of returns might sound average but they are high, and highly suspicious. Virtually certain gains at that rate are very rare. If they weren't, we'd all invest in them today, and re-invest, turning £1,000 into £133,000 in just 35 years. Put that way, I hope you now see it's unlikely.

Consider any investment touted as better than 7% a year with great caution. Avoid if there is any doubt, which there usually should be.

2. Live within your means now

Most lovemoney.com readers will know the phrase “live within your means”. The reasons for doing so are obvious, and yet we don't. At least, we decide not to do so straight away.

There are psychological reasons for that, as I explained in What a personal finance GCSE won't teach you. But another reason is that we think it's fine not to start now because we'll make up for it later. This is a desperately risky and costly thing to do. You must get your budgeting under control now if you want to be wealthy, without waiting for your next pay rise.

Firstly, let's talk about the cost of waiting. Say everything goes smoothly, you have no emergencies between now and your pay rise or bonus and, as you hoped, the payout is a big fat one.

The thing is, you're still poorer and you'll still be able to afford less for the rest of your life, as a result of not budgeting sooner. I explained more on that in How to spend less and have more.

I have lost count of the times friends and colleagues have told me that they'll pay down debts with their bonus next month, only to find that the same time next year their debts have still grown bigger. Unlike investments, debts can easily grow at 15% per year if you're not budgeting. Compare that to your 5% bonus and 3% pay rise: you're not winning, you're losing badly.

Then you have those debtors who are expecting massive promotions and pay rises, perhaps by job hopping and hard work. I've seen plenty rest their hopes on career breaks, but dreams are not the place to balance your income and outgoings. It's a dangerous game: far too many people are over-confident, because the next rung up is always more competitive. Over-confidence is a major cause of bad money management.

And what if you do get that big promotion? I've seen someone's debt situation gradually worsen and his “way out” was always to earn more money. He did, and his career earnings were enormous. But the stress and pressure rose with his earnings. He eventually beat his debts but, now in his 60s, he's got nothing to show for it: no savings, no house, no pension. All because he didn't adjust to living within his means.

Finally, you might one day get such a nice income boost that you really do begin to balance the books indefinitely but, in between, you're vulnerable. Small emergencies push you further into the red, making you poorer for the rest of your life. Medium- and large-sized emergencies, which all of us are likely to face from time to time, are very difficult to handle. You can't see debt misery, but it could easily be around the corner. Make the tough decision now, and you'll face fewer hardships overall.

3. Buy bank products separately

My last point is the most simple of all: buy bank products separately to save money.

Don't get tied in to one provider offering you a bundled mortgage and current account deal, such as Santander's offer for the two which bungs you £200 cashback. It might be, for example, that the current account suits you, for which you'll get £100 cashback if you get that alone. However, other mortgages are likely to be much better for your circumstances, and could save you hundreds more than the cashback is worth.

Do a proper, separate comparison of current accounts, mortgages and credit cards. If comparing individual products with combined deals is too difficult for you, just buy separately and you can expect to be better off over your lifetime.

More: Stay on top of the latest scams with Tony Levene's blog | How to retire like a Welshman