Effective Wealth Building Strategies
People often wonder why the rich keep getting richer. Do the rich have some secret sauce that allows them to continue to propel their wealth year over year, while the average individual struggles to pay their bills and save for retirement?
If you’re hoping for a magic wealth potion or secret, sorry to disappoint you. There’s no secret sauce.
Creating wealth is about diligently investing in yourself, education and knowledge, learning the basics of finances, understanding risk and reward, and taking appropriate risk where required. Once you have those mechanics, it’s about leveraging your wealth by investing appropriately and earning out-sized returns. Simply stated, that is the strategy for wealth creation.
If you do the above over and over, you will build generational wealth that will extend well beyond your lifetime, and extend to your heirs. A few additional tips....
1. Spend Your Time Investing in Yourself
Having a focus on personal development will help you significantly increase your earning potential. It’s obviously more advantageous when you’re younger, but it doesn’t need to be limited by age.
2. Rethink and Understand Your Relationship With Risk
If you’re looking to become wealthy, identify some low-cost risks you can take today. Examples include starting a side business or if you already own a business, adding a different revenue stream. When you find a risk that starts to offer some payoff, that’s when you go all in.
3. Build Multiple Streams of Income
If you know how to teach soccer, don’t teach soccer. Find a way to create soccer tutorials and sell them online so they create revenue around the clock. If you’re good at cooking, think about developing a side gig of online cooking classes.
4. Practice the Art of Self-Discipline
Be reasonable, ask yourself each time you approach a financial transaction, “is this a want or a need”? And even it’s a need, do you need it right now, or could it wait? These wealth mindset- decisions are often the differentiating factor between someone who makes good money and just “gets by,” and those that make an average income and thrive on it.
Stop buying things that you do not need. This is one practical way to build wealth. It takes a lot of discipline to not buy anything beyond what you need. But once you are used to it, it’s super easy.
5. Develop a Wealth-Oriented Mindset
One of the top tips for building long-term wealth is changing your mindset. Everything starts there because you are the only one holding you back. Sure you need to pay off debt, manage your money better, and make saving automatic BUT you really have to believe you can do it and that it’s worth it. You have to get out of your own way. The majority of people are broke and living from hand to mouth with nothing to spare. This is because of how they think about money and how to manage it. It is crucial for you to understand how you think about money and why and then test those thoughts against facts and reality.
This is especially true if you want to build wealth. You have to believe that you should build wealth, that wealth is a good thing, and that your future self will need income. If you think money is evil, the wealthy are soul-sucking devils, or that you will never retire someday, why in the world would you try to build wealth? Some things to think about in order to change your mind-set includes testing your views against reality.
6. Track Your Net Worth
The next tip for building wealth is to track your net worth.
A recent study found that the people who write down their goals and met with an accountability partner to discuss their progress were 33% more likely to achieve their goals than those who did not write down their goals.
If you really care about achieving something, you should take intentional steps towards that goal — right? If you are a student, you want to make sure you are completing the required courses for your degree. If you want to be a professional athlete, you should manage your diet and exercise strategically daily. So why would you treat your wealth-building and financial independence progress differently?
Tracking your net worth with an intentional frequency forces you to recognize your progress (or lack of progress) over time and gives you an opportunity to change your strategy if you are not meeting your own expectations. Even if you only check your net worth quarterly or every 6 months, you’ll still be able to see it change over long periods.
7. Remember to Always be Learning
By reading books, especially with different viewpoints, listening to successful people in personal finances or entrepreneurship, and reading financial websites, you will have the ability to refocus your entire money mind-set. Knowledge is never-ending, regardless of your expertise, and can truly impact your path to future wealth.
8. Invest Wisely, Stop Wasting Money, and Work Hard
Save and/or invest a percentage of your monthly income. It may sound old-school, but in reality, saving and/or investing a portion of your monthly salary is still on top of the many ways to build up your wealth. By doing so, your money increases over time without having to do anything.
One final Tip:
Work hard now, enjoy the perks later.