Wealth is a word we all know, but few of us know what it means and how to acquire it. To build wealth, you must have mastered financial concepts that most people fail to pay attention to. Building wealth is about more than just making a lot of money – it’s about consistency, security, and growth.
We are certainly in the best time period in human history for building wealth. We have unlimited information available at our fingertips through the internet, and a free market economy where meritocracy is rewarded handsomely.
Today, there’s really no excuse for being uneducated financially. One of my goals for this site is to bridge the female-male financial education gap and encourage women to pay attention to their finances! We are earning more money and we deserve to know how to manage it.
So back to the topic at hand: how does one build wealth?
Well, as they say: patience is a virtue.
While living in a modern society has its perks, the downside is that many of us have an ‘instant gratification’ complex. We want everything and we want it now!
This isn’t really how wealth works though. Wealth is acquired over time. There’s just no viable get-rich-quick scheme unless you’re born with some extraordinary ability or come up with a powerful business idea early on in life.
The biggest myth is that we have no control over our wealth. You don’t need to be a gifted entrepreneur or inherit millions to create wealth for yourself. You just need to have an interest in financial education.
How to Build Wealth
The basic steps to wealth are quite simple:
- Increase your income
- Spend less than you earn
- Invest the difference
While it seems overly simplified, it’s really that basic. The problem is that most people are not patient and become frustrated too soon. Getting rich slowly isn’t glamorous, but that’s how it’s done.
Let’s break it down.
Increase Your Income
The first step to building wealth is increasing your income. There are many ways to do this, but most often that means either: getting a good college education or gaining the work experience necessary to get a better paid job.
I have many qualms about the current higher education requirement for jobs in today’s market, but they are a reality we have to live with for the time being.
An easier path to higher income is perhaps through experience in a well-paid industry like technology. This is precisely what I did to double my income in my early 20s.
I began by following my passion in the arts fresh out of college, but when I realized how low the salaries were, I quickly shifted my focus to tech. I didn’t have any coding skills, but I did have experience in customer service and sales. I worked an entry level tech sales position until I could get a better sales job at a VC-funded start-up and earn about $80,000 as a 25 year old.
Find a high paying industry, get some experience at a small, less competitive company, and eventually work your way towards a higher salary at a bigger company.
Chris Gardner famously took an unpaid internship as a stock broker in the 1980s, gained the experience necessary to get a well-paid job, and eventually started his own firm.
Spend Less
For most Americans, housing, transportation and food are the three biggest expenses they have in life. Reducing these expenses as much as possible will help you work your way towards wealth.
This might mean making some sacrifices like renting a smaller house than you’d like, cooking more meals at home, and buying a used car or taking public transportation.
Saving money is certainly an art, but if you want to build wealth, it’s one you must pay attention to.
Invest
The last step to building sustained wealth is to invest your leftover earnings. You should aim to invest at least 50% of your income, if not more. The earlier you start, the more you’ll make.
Investing is a complex topic, but the easiest way to get started investing is through the stock market. Many people think of stocks as risky, but there are many ways to mitigate that risk. One of the smartest ways to do this is to purchase shares in an S&P 500 fund, which invests in the 500 top performing American stocks. This strategy has consistently delivered returns when the stock is held over long periods of time.
Wealth Management
Long term, you’ll need to think about wealth management strategies. After all, if you spend your fortune, there won’t be anything left for your children or family. The greatest wealth managers will show you how to protect your wealth indefinitely. There are strategies for protecting the “pot” so that it works for you without diminishing in value over time.
Have you heard of Buy, Borrow, Die? This is one such strategy that the wealthy use to live off their wealth without chipping away at the block.
There are many ways to be wealthy – socially, physically, and more – but I wanted to focus on the financial aspect of wealth, since it’s the one that women tend to overlook the most.
Wealth is something that everyone craves, but few master. I hope this site will help you learn the best modern strategies for building wealth in the 21st century.