How to Build Wealth

Learning how to build wealth is something that all of us should learn to do and should certainly address at some point in our lives. The fact is that many of us put off creating wealth in our lives and miss out on the momentum on having money work for us.

Needless to say, wealth is much easier to start creating when we are younger. However, as many of you are probably saying to yourselves right now, the problem with that is when you are younger, you are earning less money, so maybe this makes it actually harder for young people to create wealth.

Yes, this is a wealth paradox, isn’t it? Young people have more time to build wealth, but earn less money. On the other hand, older people earn more money, but have less time for creating wealth.

The important aspect on how to build wealth is simply to get started regardless of your age. You always have the rest of your life to grow wealth and today is always a good time to start. Do not get discouraged about what you could have done with your money in the past – forget about that, you no longer have control over past actions. Focus on right now and build for the future. Let us examine the three basic factors in building wealth.

How to Build Wealth – The First Critical Factor

I call this the most critical factor because it needs to be done regardless of your situation. I do not care if you earn a lot or a little, you need to do this one thing religiously to build wealth. This first factor is saving your money.

It amazes me how many people argue and want to say that they can’t afford to save. My response is yes you can. As a bare minimum, start putting aside at least 10% of your income every single time you get paid. It is preferable that you put it in a place where it can earn interest and that you cannot get to it very easily. There’s a reason why the early piggy banks had to be broken to get the money out.

You must discipline yourself to do this on every single payday. You may have heard the term, “pay yourself first”. This is exactly what you are doing, paying yourself first.

There is one simple rule with this money you are saving. You must never ever spend this money. This is how to build wealth. If you need an emergency fund, then either set aside money in another account or use a credit card for that, but do not spend the nest egg you are building.

The biggest reason for this is that as you possess more and more money in that account, your mindset will begin to change and you will begin attract more and more money to you. Thus, you will begin creating wealth out of nowhere. Don’t believe me? Try it and see – it really works!

The Second Critical Factor of Creating Wealth

The next quickest way to create wealth for yourself and your family is to “reduce your wants” as Ben Franklin once said. In other words, eliminate your debts.

Let’s face it, young families accumulate a lot of debt in the early going. There is simply no getting around this. There are college loans to pay off, doctor bills to pay, kids going to school, and so forth. So if you are going through this right now, do not worry about this, try to think longer term thoughts and imagine a time in your future when your debts are gone. The fact is eventually they will be if you work at paying them down now and never ever give up.

The worst thing that you people do is conform and accept a world where everyone stays in debt, so they just keep amassing debt. Credit cards are a big part of this. Do not let yourself conform to this mindset. Keep your head to the grindstone and keep paying off your debts.

Pay off your debt by starting with the loan or credit card with the smallest balance and pay extra principal to get that balance paid. When that one is paid off, take the extra available money and apply that to the next smallest loan until it is paid off. And then move on to the next smallest one. Do this until all your debts are gone.

When your debts are gone, then immediately increase your savings. Open a savings account for emergencies too, so that you will never use your credit cards again. It is not a bad idea to keep one credit card for extreme emergencies and perhaps trips, but only keep the one with the lowest interest rate. This is how to build wealth, my friends.

The Final Critical Factor of Building Wealth

As you might have guessed, the last factor of creating wealth is to “augment your means” as Ben Franklin said in his famous quote. This is another way of saying increase your earnings. Ben Franklin also said that the quickest way to build wealth was augmenting your means and reducing your wants simultaneously. This is very true, but there is a slight problem with that, which is the reason that I listed this factor as the last one.

The problem is that in reality many of us have little control over how much we earn. This is because the majority of us work for an employer and most of the time they decide when we get to earn more. Yes, we can get more education and learn more skills, but those are never guarantees for more earnings.

We have far more control over saving our money and reducing our debts than we have over increasing our earnings. But here’s one thing. After we save a large amount of wealth in our nest eggs, we can create a passive amount of earnings by letting it earn a return. This is just another reason to begin saving as soon as we possibly can.

Conclusion

The take home lesson here is we really can learn how to build wealth. It is not rocket science. In fact, it is more about being disciplined and having the will power to see it through.

I guarantee you that if you follow these guidelines and stick to them, you will begin creating wealth much sooner than you could ever imagine.

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