Building wealth can be fun and easy.
The first step is to create a plan, the second is to monitor your strategy and process, and the third is to evaluate and tweak it if needed.
Growing your wealth is creating long-term income streams through multiple sources. While most people think of income as what they earn from a job, instead, think of the wealth you can grow from savings, investments, and income-generating assets. Accumulating and growing your net worth is a critical component of a successful financial plan and is essential for creating a financially free life you love. This is because it allows you to generate passive income so you can spend your time doing whatever you choose.
7 Steps to Building Wealth
1. Start Building
The best time to begin is yesterday, and the next best time is right now. Instead of beating yourself up for not starting earlier, commit to creating your plan by following these seven steps. While most people just want to start investing, it is ideal to first create a financial plan.
2. Create a Financial Plan
Developing an overall financial strategy is critical to building wealth. A comprehensive plan will guide you in creating an emergency reserve and a plan for unforeseen risks that can wreak havoc on the wealth you accumulate.
Specifically, your plan will help to ensure you have adequate property & casualty insurance, disability, life, and long-term care insurance, as well as an umbrella policy if appropriate. It will also help you save for retirement, reduce your tax bill, and develop an estate plan– all of which are critical to your long-term financial success.
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A properly devised financial plan will also guide you in the following areas:
- Identifying your financial goals
- Paying off debt
- Replacing high-interest credit cards with a plan to only charge what you can pay off each month
- Strategies to increase the amount of money you are saving and investing, including funding your retirement accounts
- Creating a long-term investment strategy
3. Making & Saving Money
The first step in building wealth requires that you make money. This is income you will likely earn from a job but also includes side hustles, such as affiliate marketing or a home-based business. The key is to save money from the income you earn. This is the first step to accumulating wealth.
Too often, people focus on earning or making money but never begin saving or investing their profits. As you can imagine, this often leads to disaster.
There is a big difference between being rich and wealthy. Rich people earn and spend a lot of money, while wealthy people accumulate assets and create multiple income streams.
The first step is to save money in an emergency fund. This is a cash or equivalent account like a money market. Generally, the amount equals six months of expenses.
Now that you have funded your emergency reserve and are hopefully also paying down your debt (if you have any), the next step is to start investing your excess money.
Before you start with “I don’t have enough money,” “I will start in a few months,” or whatever excuse pops up, read, re-read, and take action on the next step.
4. Master Your Mindset
For some, this may seem hard to understand! You want to start building wealth, not working on your mindset. If you have not already created your plan and begun saving and investing, it may not be as easy as you want to believe. Before you beat yourself up, let me explain how it works.
Your subconscious, limbic, old brain (whatever you want to call it) hates to change. It is there to protect you, conserve calories, and has no desire to change anything. On the other hand, your prefrontal cortex is excited and ready to get started.
The problem is that if your subconscious mind and conscious mind are not on the same page, the odds are that your subconscious mind will win. And the result is you do nothing. And while it may seem like no big deal, it will be a big deal when you are broke in retirement or have to work until you are 70 or older.
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5. Invest and Create Wealth
Now that you have created your plan, funded your emergency reserve, and are focused on making and saving money, you are ready to start building wealth.
This first step is to create an investment plan. This will help you get clear on your goals, risk tolerance, and timetable.
If you can afford to hire a financial advisor, then do so. Or, if that is not an option, seek support from the company you plan to invest with. If they do not have a risk assessment or can’t provide you with guidance, then find a different firm. Most major firms offer support and guidance to ensure your investment portfolio is consistent with your time horizon and risk tolerance.
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My Success Secrets for Building Wealth
Lastly, I attribute three things to my financial success.
First, I began investing $25 per month years ago. At the time, I was a single parent and was watching every penny because I didn’t have any extra money.
Second, I worked extensively on my mindset.
Third, I created luck in my life. How? By showing up and doing the work regardless of how I felt in the moment.
Let me explain what I mean and how it may show up for you.
First, it is essential that you determine what you really want. Second, you must decide why you want to achieve it, including your intention for accomplishing it. Finally, determine how accomplishing the goal will make you feel.
Those three steps are critical to success. While most people are motivated when they start, once the initial excitement wanes, people often give up.
The limbic brain realizes you are shifting old habits and beliefs, and because this can be challenging and even hard, it starts to fight back and work against you. You may feel sad, depressed, or even overwhelmed, and you stop moving forward because you get wrapped up in how you are feeling versus how you will feel after making you goal a reality. This, my friend, is a million-dollar nugget that can literally change your life, so write it down and put it where you will see it every day!
6. Celebrate Your Wins
Before creating and implementing your plan, decide on a reward for achieving your goal. For example, going to dinner with friends, getting a massage, or playing a round of golf. Whatever brings you joy!
First determine a consequence for if you don’t stick to your commitments. This could be donating to a political party or special interest group you do not like. While I prefer positive consequences, many people are motivated by negative ones.
Regardless of your motivation, remember to celebrate your wins!
7. Monitor and Tweak Your Plan
Once you create and implement your plan, take a minute to determine when you will monitor and review it and make tweaks based on your situation, as well as outside circumstances, such as the economy, political matters, etc.
How to Build Wealth from Nothing
A common question is where to start or how to begin if you do not have any assets or savings. You start the same way you would if you were eating an elephant—one bite at a time.
If you don’t have enough money to start investing, then get creative.
Some ideas may include:
- Ask for a raise.
- Find a new job or career that pays more.
- Find a side hustle. Examples include a part-time job, home-based business, online venture, or affiliate marketing.
How to Build Generational Wealth
Most people want to build wealth to help their families, including their children and grandchildren. Here are five steps to help you create generational wealth that lasts long after you are gone:
- Invest in yourself and your family.
- Start saving early and often.
- Live below your means and avoid debt, especially consumer debt like credit cards.
- Invest in appreciating assets, such as real estate, stocks, businesses, etc.
- Give back and support others on their journey to building wealth (what goes around comes around!).
- Leverage your heirs inheritance with life insurance.
By following these simple tips, you can start building generational wealth that will benefit your family for years.
Building Wealth Conclusion
The first step is to start. This includes creating a plan you can follow, so you know where you are going and how to best reach your desired destination. If you haven’t begun, work daily on your mindset and put “making and saving money” at the top of your list.
Then, create your investment plan by determining your financial goals, time frame, and risk tolerance. And finally create your estate plan to ensure your assets pass as you desire.
And remember—set positive or negative consequences for completing the task required to implement your strategy. Then, schedule time to consistently monitor and review your plan.
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