“Wealth Starts in Your Mind, Not in Your Wallet”
Have you been pondering why the rich continue to get richer? Do the rich have some wealth building formula or secret sauce that allows them to become wealthy year by year, while the common people struggle to pay for their necessities or save for the future?
Sorry to disappoint you, but there’s no secret sauce or wealth building formula.
With that in mind, you must now be wondering how is wealth created?
“If you want to secure your financial future, you must spend more of your time and energy on understanding wealth, and less time on trying to predict the markets” – Ron Malhotra
So, before we continue, we must understand one thing, what does wealth truly mean?
Wealth measures the total value of assets owned by a person, community, company or country. The most common expression to describe wealth is net worth. It’s equal to assets minus liabilities. When referring to a group of people or a company that may be described as wealthy, it means they own goods and valuable resources.
Now, let’s return to the topic of wealth creation.
Wealth creation is all about self-educating and growing your financial knowledge, understanding risk and reward, and taking appropriate risks where required.
Let us now move on to how wealth grows? Using the following example would be the best way to explain and understand this concept.
One of the most powerful concepts you will apply to grow your wealth and become a future millionaire is understanding the application of compound interest. You must have heard about the term ‘Compound Interest,’ but most people haven’t fully comprehended the application of compound interest, and how powerful it is.
If you had the following two choices, option one – you could take a million dollars today, and that money will never grow for the rest of your life, or option two, you have 1 cent, and that will double every day for the next 31 days…which option would you take and why?
Most people will go with the million-dollar option because its face value is evident. However, if you choose the 1 cent option, the money would be worth 10.7 million on the 31st day.
So, if you don’t understand how compounding works, you cannot make the right decision. With compound interest, it’s also very crucial to understand that it’s a snowball effect. It would be best if you allow compounding to take its course because it’s through compounding that wealth is created.
“Having a degree without knowledge of wealth creation is like having a car without wheels. You have the vehicle but you won’t go far.” – Ron Malhotra
The wealth creation process is really simple, but you can’t increase your wealth overnight. It’s a long process that requires proper knowledge, patience and attentiveness towards investment and returns. Moreover, to boost your profit, you need to invest the returns continually.
Are you looking for ways to build wealth or increase your wealth? Do you need some help with wealth creation strategies?
Don’t worry, we’ve got you covered!
Following are some of the best wealth building strategies for beginners.
1. Work on Building High Income Skills
Work on developing high-income skills that will help you increase your wealth and set you free from financial struggles. High-income skills are specific skills that earn you six-figures annually, keep you above all, and always in high demand. Mastering high-income skills can make a significant impact on your income. Procuring the knowledge and experience to learn and master high-income skills, requires time, patience, and energy.
There are plenty of skills that give you a colossal pay off once you develop them. Learning high-income skills such as digital marketing, programming, copywriting, consulting, etc., can help you deliver value to the marketplace and, most importantly, build your wealth.
2. Have a budget to separate living expenses and lifestyle expenses
Having a realistic budget that separates your living expenses from lifestyle expenses is one of the best money-building strategies you must implement to succeed on your wealth creation path. Your budget should be your map for your financial journey. Creating a budget is easy but successfully sticking to it is quite difficult and challenging.
Separating living and lifestyle expenses will help you allocate where you can cut down costs and save money for future emergencies or for investment purposes. Even a small cut down in your expenses can add up to significant savings. Your savings allow you to invest the right amount of money that will help you accomplish the goal of building wealth. Create a budget, spend less, save more, and build wealth faster!
3. Open a savings account, and don’t invest until you have at least six months of savings in the account for emergencies
Savings should always be one of the most important wealth generation strategies. Funds kept for unexpected emergencies are the backbone of your financial plan. Open a savings account at the bank for depositing your emergency funds.
A savings account keeps your money safe for use in the near future. While the bank pays a low interest on your deposit, putting your savings into your bank account is still the most secure place to keep your emergency funds.
Before investing the money, one must have an emergency fund, say at least six months’ worth of income in the bank account to grow your wealth. You can now investment freely without stressing about the risks associated with as you have emergency funds as a backup if required.
4. Take out a basic level of insurance to cover medical expenses, contents insurance and disability insurance at the very least
Insurance safeguards us from financial losses. It protects you from unforeseen events like medical emergencies, accidents etc.…. Take out a basic level of insurance to cover medical expenses, contents insurance and disability insurance at the very least before you get onto the road of wealth building.
Insurance as an investment avenue has dual benefits – Savings & Protection. It’s a long- term investment that helps to build wealth for the future. It’s important to research the best insurance plans offered by the many different insurance companies within the market, before reaching a final decision.
5. Start investing small amounts in a diversified stock portfolio, or save for a down payment to buy your first piece of real estate (seek advice from a professional about where to invest)
Investment is the key to building wealth quickly. As a beginner, you should start with investing small amounts of money in a diversified stock or mutual fund portfolio. Millionaires say real estate is the best long-term investment option in comparison to others. Making smart investment choices is essential for wealth creation in the long haul.
Seeking professional advice before making an investment will help you prepare a better financial plan for long-term wealth creation. A financial advisor helps you manage asset allocation, understand your risk profile, make sound investments, plan funds for an emergency. Reinvesting the returns is a fantastic way to maximize your profit and build your wealth quickly.
Also Read: Top 10 Communication Skills in the Workplace and How You Can Master Them
6. Read at least 10 books every year on personal finance
Knowledge is never enough. Staying educated about money is one of the most powerful wealth-building strategies. Learning helps you grow as an individual and enables you to develop a better approach to investing your money. Read at least ten books on money every year, to gain the knowledge that will ease your financial journey.
8 Wealth Habits of Financially Successful People: Discover How Successful People Acquire Wealth and How You Can Too! By Ron Malhotra is a must-read finance book for beginners. This is one of the best financial literacy books that will help you transform your attitude to money and pave the way to your financial freedom. With his in-depth knowledge and experience of the financial industry, Ron has distilled the information into eight wealth habits that anyone can follow.
7. Learn to live on 80% or less of your income from the outset
It would be best if you start learning to live on 80% or less of your income. The 50/30/20 budget rule is the most popular and simple wealth-building formula.
- Spend 50% of your income on needs
- Spend 30% of your income on wants
- Keep 20% of your income for savings or debt repayments.
Preparing your financial plan based on the 50/30/20 budget rule will help you build wealth quickly. Simplifying your needs and wants over 80% of your income is not easy, but it’s essential to cut meaningless expenses to save more money. This budget rule is the absolute key to increase your wealth.
“Under achievement and mediocrity is the result when people are not skilled at optimizing their time and maximizing their efforts.”
– Ron Malhotra
Building wealth isn’t complicated, but it doesn’t happen overnight. Optimize your time, maximize your efforts, and grow the financial knowledge that will help you make better and informed decisions. Practice the above wealth-building strategies that can help you accomplish your long-term financial goals.
Time is precious and priceless, so stop wasting time, be more productive and start building your wealth today!
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