What Is Wealth Building? A Guide On How To Start Growing Your Fortune
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In a 2017 CareerBuilder survey, 78% of U.S residents live on a paycheck-to-paycheck basis. Many individuals are struggling to support their daily needs and in making ends meet. The sad truth is that this might a familiar story to you. However, if you’ve decided that you want to leave your typical survival mode life, and move towards wealth building, this article is for you.
Now is the time to rethink your attitude and actions towards work and financial security. You have to understand what makes a millionaire’s mindset different from the usual earner’s mindset. To help you, here’s what you need to know about wealth building, wealth building assets, and successful wealth-building strategies.
Wealth Building: A Brief Overview
How one defines wealth and being wealthy is subjective. For some, being wealthy simply means having enough to cover their daily needs, bills, and extra for leisure and pampering. Others, like you, may think about the ability to travel and spend without worrying. Regardless of your views and your purpose for wanting to accumulate wealth, wealth building is a long-term, continuous process. It is about generating long-term income through multiple sources.
Wealth building is more than just focusing on your current job-based income. Even if you change your lifestyle but you’re still earning the same, it’s nearly impossible to leave your paycheck-to-paycheck life. Yet, of course, you need your current income-generating work before you begin building wealth. You need resources so you can start somewhere. In making decisions, you need to rely on accurate information, proper planning, and goal-setting.
Educate yourself about side hustles and investments where you could participate. If you want to increase your knowledge and skills in entrepreneurship, you can join various certificate programs. Some of these you can have access to for free. Wealth building is about participating in long term income-generating activities. You’ll learn about its importance in the following section.
Wealth Building: A Worthwhile Use Of Time?
Pause for a while and look at your income, financial status, and lifestyle. If you think you’re earning enough to support your needs and wants, you might ask, “Is wealth building for me?” Obviously, yes. You might be earning enough for now but remember, you’re building wealth for your unpredictable future. You need to understand that wealth building is far more than just showing off and bragging about your life. It is about how you’ll beat your current financial status not merely beating someone else’s.
Here are the top three benefits of wealth building:
1. Achieve Financial Freedom
You are living in a capitalistic society, that’s why almost everything requires money. You want to acquire properties, you need money. You want to invest in profit-generating activities or start your own business, money is an essential capital.
Wealth building gives you the freedom to do just that. Imagine being able to break the cycle of debts and “just enough”. Being independently wealthy will be around the corner with wealth building.
2. Open Doors to Various Opportunities
With accumulated wealth and a secure source of income, you will be presented with wider options. Now, money won’t stop you from choosing to advance your professional career or risking in various investments. Careful planning will still be part of the process. But, you don’t need to worry about letting an opportunity go just because you are not financially capable. For entrepreneurs, for instance, you can successfully diversify your investment portfolio.
3. Achieve a Healthy and Comfortable Retirement
No one wishes to run out of money, right? Maybe that’s why, oftentimes you ask, “How long will my money last?” This might not be a problem especially if you’re still in your prime working years. However, this will be a serious concern once you stop being employed.
As you dream to have a healthy and comfortable retirement, wealth building is the answer you’re looking for. This enables you to comfortably live even after you retire. If you want to take some time to travel afterward, your investments will handle the bills.
Here’s an inspiration as you take your first steps towards building worthwhile investments. Read Michael Batnick’s Big Mistakes: The Best Investors and Their Worst Investments. You’ll know what the best investors see in wealth building that even with mistakes committed, they never stopped taking the risk. Learn how to transform every mistake into opportunities for success. Who knows, this might be exactly what you need to seriously consider investing.
Most High Performing Wealth-Building Assets
Wealth building or wealth-creating assets refer to possession or assets whose value generally increases over time. These are money-making assets. Although some might be outperforming others in terms of returns, everything has its tradeoffs. The key is to choose the right wealth building asset for you depending on your financial goals. Let’s explore further some of the highest performing wealth-building assets.
A study published in 2017 revealed that residential real estate has the highest gain compared to other forms of investments. The return on investments is on an average of 7.5% yearly. This makes real estate properties one of the most well-known smart investments for many. Aside from having the highest gain, investing in this will most likely provide you with consistent cash flow.
There are various real property options you can choose from. You can buy or build rental buildings or even invest in house hacking. House flipping is also a popular business nowadays where you’ll buy properties, renovate them, then sell for profit. Perhaps you want to check out the Best house flipping books of 2020 for your reference.
One of the benefits of real estate investments is that you have full control over your decisions. You can strategize and decide what you want to do and how you plan to do it. In other words, the responsibility is yours in turning assets into actual income. But this can be risky as well especially if you don’t know much about this industry.
Good thing, you can use a little help from Jay DeCima’s book to prepare you. Get Start Small, Profit Big in Real Estate, and make one of the best decisions you could ever make.
Private Notes Secured by Real Estates
If you want to still invest in real estate but on a safer side, real estate note is for you. Instead of direct real estate investments, you act as a lender through real estate notes. You provide promissory notes for someone else who is owning real property as a guarantee for their future payment. However, if you’re just new to the business, it is important that you do some background check first. You don’t want to fall in some sort of scam.
Additionally, since it will take time before they pay you, you have to make sure you have contingency money. Just in case you find other things worth investing as well. There are three basic types of private notes namely:
- Loans to house fix-and-flippers
These types of loans are usually in shorter terms, like 6-12 months, with higher interest rates. As its name suggests, you’ll be lending to people who are investing in house flipping as described earlier.
- Seller-financed notes
According to experts, this type of lending will be profitable if you know what exactly you should expect. Know more about this type of private notes here.
- Loans for homeowners
This is pretty straightforward. You’ll act as a lender for aspiring homeowners.
If you’re interested in this type of investment, it will be beneficial to read Jimmy Napier’s book. Invest in Debt explains the fundamentals of money’s time value and helps you understand note investment. Make sure to grab a copy especially if you’re a starter.
Maybe you are also curious about how much money can you earn from stocks. But even before talking about the earnings, you should be aware that it won’t be the same for everyone. Even with people who have the same stocks, this isn’t possible unless you move the same. This is better for a long term investment since stocks are unpredictable which may affect the returns especially if short term.
You may choose to invest in a single company. Although, it will be more advantageous if you’ll diversify your portfolio and buy ETFs. This is also beneficial particularly because of market volatility. For those who are new to the stock market, you can check out Matthew Krater’s A Beginner’s Guide to the Stock Market: Everything You Need to Start Making Money Today. Here you’ll be oriented with basic concepts about stock investments and give you tips on how to buy your first stock.
How to Get Started in Wealth Building
Various resources will provide you with steps and techniques in building wealth. For instance, you can try looking at published articles like Forbes or Business Insider. But these are some of the basics that will guide you as you start your wealth-building journey. Take note, success will only come if you make this part of your daily habits.
Set a Clear Goal
It is not a wise decision to build wealth aimlessly. Instead, have a clear vision of where you are headed. Plan and set a target number of what you want to achieve. It’s helpful to try imagining the kind of life you want to have after 15, 20 years, or after retirement.
The wealthy people you know most probably set a target number and work towards achieving that goal. It is much like going on a trip. You need to know your destination then, decide on how you’ll get there.
Think for the Long-term
This is what Ashley Fox, a financial education specialist, said in an interview with Business Insider. According to her, “wealthy people think of longevity.” Long-term thinking is what keeps the wealthy apart from the rest. They live for today while keeping in mind the future. So, instead of focusing on short-term concerns, also consider the long-term implications of your actions.
Strategize When Choosing What and Where to Best Invest
Don’t just blindly invest in anything you find on the internet or advertisements. Rather than falling on a specific investment’s marketing strategy, be informed and knowledgeable about where you’ll bring your money. You have to understand the costs and assess your return on investments. Even before taking the risk, know the ins and outs of your investment. You can refer to the best wealth building assets mentioned earlier in this article.
Earn More, Save More
After deciding where to best invest your resources, you’ll be reaping the benefits in a few years’ time. The idea is that you will earn more from these investments. But, earning more does not mean you will spend more. Saving should be consistent and growing. Your larger income should translate to a larger percentage of savings.
Even before you start spending, dedicate a portion of your income for savings. The earlier you do this, the better. You won’t be able to accumulate wealth even with a large income if you don’t know how to save. Read the data-backed insights of Thomas Stanley and Sarah Stanley Fallaw in their book The Next Millionaire Next Door: Enduring Strategies for Building Wealth. This will help you understand more about wealth and income and how you can live below your means.
Remember, you won’t build your wealth overnight even though you’ll find various resources talking about making money while you sleep. It will take you a lot of hard work and resources invested — time, money, energy. Not every known millionaire was born instantly rich. A lot were rags to riches stories. Thus, have the patience as you work your way up the ladder.
Today is a Great Day to Start Building Wealth!
Like any other worthwhile thing, wealth building takes time. It is not an easy feat as well especially with the ever-changing environment. But if thinking about financial freedom, flexibility, and control sounds appealing to you, wealth building will surely win you over. Invest in wealth-building assets like real estate properties, private notes, stocks, and bonds. You can also try looking for other forms of side hustles.
There will be sacrifices made on your part but soon you’ll realize, everything is worth risking for. At the end of the day, even ordinary people upon making the right decisions can make their first millions. Learn a thing or two from Chris Hoganwill’s book, Everyday Millionaires: How Ordinary People Built Extraordinary Wealth―and How You Can Too. This might be the kind of push you need so you’ll start believing in yourself too.
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