Building wealth involves having multiple sources of long-term income. You’re not just relying on your salary; you also have investments and assets that generate income. Proper financial planning and the right mindset are crucial in wealth building. Additionally, a good credit score is essential to have more access to resources like loans to start a business.
You can request second chance loans for bad credit if you need help building up your credit score. We recommend digital lending platforms since they are more flexible than traditional lenders because they work with borrowers of varying credit scores and histories. However, remember to be on time with your loan repayments to avoid hurting your credit score even more.
Now, let’s delve into the main concepts involved in building wealth.
Main Concepts to Wealth Building
Practice the ‘abundance’ mindset.
Having this mindset means you believe everyone has ample resources and opportunities to succeed. Maintaining this mindset requires intention and effort for many people, particularly those who grew up with limited resources. However, you can take your negative experience of growing up with limited resources and use it as motivation to build a better future for yourself and your loved ones.
Although we all indeed begin our lives with varying amounts of resources, how we approach wealth building is still the ultimate factor in determining our success. The greatest millionaires believe in expecting abundance and working hard for it. We have to consciously remove self-doubt and filter negative thoughts so that we don’t end up having a ‘scarcity’ mindset.
Make million-dollar decisions.
When you shift to a more positive mindset, you’re likely to make million-dollar decisions that could benefit you financially and eventually improve your life. Million-dollar decisions create more options and resources. For example, when you get accepted for a job and make a counteroffer to an employer’s offer, that’s a million-dollar decision. Another example is when you proactively ask your boss for a raise when you feel you deserve it. If you don’t nurture your mindset and make such decisions, you will likely miss big opportunities.
Money isn’t always evil.
We all know the saying, “Money is the root of all evil.” Many of us firmly believe in this saying, which even stops us from dreaming of becoming wealthy. If you’ve had negative experiences with money growing up, it may be hard to grasp the concept that money can be used to do good. However, it’ll be a game-changer if you look at things from this perspective.
The best strategy is to consider the value you can bring to your community and how you can monetize that value. When you think of the value you bring, money will inevitably follow. So, the takeaway is that money can be as good as it can be bad. However, don’t let fear inhibit you from pursuing or building wealth.
A high income isn’t enough.
Having a high income does not guarantee that you can build wealth successfully. In reality, you need to be intentional about handling your finances and have the right mindset to build wealth. A high income is merely a tool for reaching success, but your main asset will always be your attitude and mindset toward your finances.
You should also start thinking about investing. With today’s inflation, the money you save will gradually lose its value over time if you just keep it sitting in a bank. The key to beating inflation is to invest, whether that’s in stocks, bonds, business, or real estate. Additionally, the rise of online investment firms has paved the way for just about anyone to start investing; you can start as low as $45 and let that grow. Ultimately, the goal is for you to earn enough money to be financially free.
Don’t be afraid to pave your path.
There’s no single formula to wealth building; the only thing that will set you apart is your consistency. Many people who have successfully built wealth are trailblazers. For some people, investing their money in a business worked for them; however, we’ve also seen people who have successfully built wealth by investing in stocks and real estate. The path you take doesn’t matter as much as your relationship with money does.
The Simple Formula of Wealth Building
According to Investopedia, there are three simple steps to building wealth: make money, save money, and invest money.
This is the most fundamental step in building wealth. You can earn money either by passive or earned income. However, you may need earned income before you can start earning passively. To make earned money, you need to determine what you’re passionate about and what you’re good at, how much you can potentially earn, and how you can make money from it.
Once you have a reliable income source, start saving. To do this, you should first monitor your spending for a month. You can use an app, an Excel sheet, or a small notebook. Record your expenses so you can see where your money goes each month. There may be room for you cut your expenses and maximize your savings, but you’ll never know that if you don’t start tracking your cash flow.
You can also automate your savings, so the money goes into your savings account without consciously thinking about it. Lastly, if you’re already cutting your costs down to the bone and you’re still not reaching your savings goal, perhaps it’s time to look for ways to increase your income.
After saving enough money and ensuring you have enough cash for financial emergencies, you can start investing. Familiarize yourself with various types of investments and do your research. The general rule is that low-risk investments typically also have lower returns. Also, diversifying your investments is vital in protecting your portfolio during economic downturns.
Whether or not you wish to be a millionaire, building wealth and reframing your mindset and relationship with money will increase your odds of making more. Money doesn’t guarantee happiness, but it will definitely open up a world of opportunities and allow you to have a better life.
John is a financial analyst but also a man of different interests. He enjoys writing about money and giving financial tips, but he can also dive into relationships, sports, gaming, and other topics. Lives in New York with his wife and a cat.