For many of us, building wealth may seem like an allusive concept that can feel far off and unattainable. With the mounting costs of day to day life, building wealth can sometimes feel more like a dream rather than an attainable goal.
What if I told you that no matter your financial circumstances, you can take steps to build wealth? That you don’t need to win the lottery, come into a large inheritance, or make a seven figure income in order to build wealth and secure a better financial future.
I believe a truly wealthy person is someone who has enough money that they work because they want to, not because they have to. A wealthy person can walk away from a job at any moment and still lead the life they want.
With everyday intention, planning, and discipline, you can build wealth. Here are four ways you can start building wealth:
1. Establish Good Saving Habits
Good habits lead to good outcomes. I recently finished reading “The Compound Effect” by Darren Hardy. In it he provides the formula “Small, Smart Choices + Consistency + Time = RADICAL DIFFERENCE”. Creating wealth isn’t about hitting home runs. It’s about getting into the consistent habit of saving. When you’re younger and just starting out, you may not be able to save a lot, but save anyway. Set a percentage of your income to save, say 10%, not a dollar amount. Saving just $1 out of every $10 you make will put you at almost double the US Personal Savings Rate. This way, when you earn more in the future you will save more, in dollar terms, and you can even increase that percentage of saving slowly over time. This one decision has the power to set you up for financial success or failure.
The act of saving is amplified when you invest those savings. Investing does not mean keeping your cash in a savings account earning nothing. Investing is putting your money into a well-diversified portfolio of stocks, bonds, mutual funds, and ETF’s and allowing the growth to compound over the long-term. Compounding it arguably the most effective way to build wealth. The reason why this is such a powerful wealth building tool is because the interest you earn on your money also earns interest.
I see way too many people who have an inordinate amount of cash as part of their net worth. While having enough cash is important for emergencies, cash will not make you wealthy. In fact, when inflation is factored in at say 3%, by holding onto cash that is making .05% in your savings, you are actually losing money in real and purchasing power terms.
The younger you start saving and investing, the more time your money has to compound year over year. Let your money go to work for you and give it the chance to multiply over your lifetime.
3. Delay Gratification
In addition to establishing good saving habits, it’s just as important to exercise smart spending habits as well. It may take some time to adjust and form smarter spending behaviors if you are used to buying what you want when you want it. Credit has made it much easier to spend money, even if you don’t have the actual cash to cover the expense, which can quickly lead you into high-interest debt.
Therefore, be mindful about your purchases and delay gratification until you know you have the means to cover the cost. When you already have smart saving habits established, it makes delaying gratification a little more palatable because you will actively be saving for that car, those concert tickets, or the vacation you really want. It’s not that you won’t attain what you want, but with smarter spending behaviors, you won’t compromise your financial security just to get something immediately.
[Related: 3 Crucial Tips for Living Within Your Means]
4. Set Goals and Be Intentional
You’ll be able to achieve your financial goals faster if 1.) you have financial goals and 2.) you make intentional financial decisions. Not unlike attaining a certain physical fitness level, setting goals, being intentional, and taking action all play a crucial role in determining your success. Before you make that next purchase, think to yourself: “Is this purchase in line with my goals? Will I be closer to my goal if I don’t make this purchase?” It’s a simple yes or no answer that should make your decision easier.
When it comes to your finances, building wealth is possible when you take action to secure your financial future and take advantage of wealth building tools that passively grow your money over time. Your long-term financial success isn’t decided in an afternoon; it’s determined by the financial choices you make today and every day.
Start making financial decisions that help you build lasting financial independence. The earlier you start, the more time is on your side to build long-term wealth.
- Jun 10, 2019 The Biggest Question You Might Ask About Social Security Benefits: To Wait or Not to Wait? Jun 10, 2019
- May 20, 2019 2 Critical Ways to Hold Yourself Accountable to Better Financial Decisions May 20, 2019
- Apr 29, 2019 The Psychology of Money, Part III: Pay Now But Consume Later and Invest in Others Apr 29, 2019
- Apr 1, 2019 The Psychology of Money, Part II: Make it a Treat & Buy Time Apr 1, 2019
- Mar 4, 2019 The Problem with Federal Spending - and How It Impacts You Mar 4, 2019
- Feb 11, 2019 The Best Way to Handle Stock Market Ups and Downs: Get Used to Them Feb 11, 2019
- Jan 14, 2019 2 Important Tips on How to Manage the Household Finances as a Couple Jan 14, 2019
- Dec 3, 2018 Can Money Buy Happiness? Dec 3, 2018
- November 2018
- Oct 31, 2018 Lake Road Advisors Announces New Partnership with Vestwell Oct 31, 2018
- Oct 22, 2018 6 Biases That Can Impact Your Financial Behavior Oct 22, 2018
- Oct 8, 2018 Open Enrollment is Coming: Are You Adequately Covered? Oct 8, 2018
- Sep 24, 2018 What Today’s Economy Means For Investors Sep 24, 2018
- Sep 10, 2018 Recent Grad That Can’t Find a Job? Here’s What to Do Sep 10, 2018
- Aug 20, 2018 How Your Financial Planner’s Network Can Help Aug 20, 2018
- Aug 6, 2018 These 2 Accounts Offer the Best Tax Advantage and Here’s Why Aug 6, 2018
- Jul 23, 2018 The Big Difference Between a Fee-Only & Fee-Based Financial Advisor Jul 23, 2018
- Jul 9, 2018 Why Titles Mean Little and Designations Mean Everything Jul 9, 2018
- June 2018
- May 21, 2018 The 5 Most Common Estate Planning Mistakes Parents Make May 21, 2018
- May 7, 2018 Here’s Why You Need to Think About the ROI of Education May 7, 2018
- April 2018
- Mar 26, 2018 Get Beyond The Price Mar 26, 2018
- Mar 12, 2018 Index Funds and Passive Fund Management: Understanding the Opportunity Mar 12, 2018
- February 2018
- January 2018
- Dec 11, 2017 The Psychology of Saving Money: Why some do it successfully and others struggle Dec 11, 2017
- Nov 27, 2017 Why Your Child's 529 Plan Should Be Direct Nov 27, 2017
- Nov 13, 2017 Get on the Road to Financial Success with These 4 Behaviors Nov 13, 2017
- Oct 30, 2017 Know the Lingo - the daily market recap and how it affects you Oct 30, 2017
- Oct 16, 2017 The 3 Unbreakable Rules for Financial Success Oct 16, 2017
- Oct 2, 2017 Follow These Steps When Selecting a Financial Advisor Oct 2, 2017
- Sep 18, 2017 Why You Should Choose a Fiduciary as a Financial Advisor Sep 18, 2017
- August 2017
- Jul 24, 2017 How Am I Doing? Jul 24, 2017
- Jul 10, 2017 Do I Pay Off (Student Loan) Debt or Do I Invest Instead? Jul 10, 2017
- June 2017
- May 29, 2017 Diversification: The Right Way to Manage Risk May 29, 2017
- May 15, 2017 Having A Tough Conversation & Helping Your Aging Parents May 15, 2017
- May 1, 2017 What Everyone Should Be Doing Post-Tax Season May 1, 2017
- Apr 17, 2017 Want to Raise Financially Savvy Kids? Try These 5 Steps Apr 17, 2017
- Apr 3, 2017 Inflation: What Every Investor Needs to Know in 2017 Apr 3, 2017
- March 2017
- February 2017
- January 2017
- Dec 26, 2016 5 Steps to Get Your Finances Ready for 2017 Dec 26, 2016
- Dec 12, 2016 How Much Should I Invest In My Company Retirement Plan? Dec 12, 2016
- Nov 28, 2016 How About What Not To Do With 401(K) Contributions Nov 28, 2016
- Nov 14, 2016 Keeping it All Together: How to Balance Personal Financial Goals with Running Your Business Nov 14, 2016
- Nov 1, 2016 Nervous About The Election And Your Investments? Nov 1, 2016
- Oct 16, 2016 30-Somethings: Why are You Wasting Time Following the Stock Market? Oct 16, 2016
- Oct 3, 2016 Will 30 Year Old's Ever Get To "Retire"? Oct 3, 2016
- September 2016
- Aug 8, 2016 Why Budgeting Doesn't Need to Be a Dirty Word Aug 8, 2016
- Jul 18, 2016 What Does a Financial Planner Do? Jul 18, 2016
- June 2016
- May 16, 2016 It's Urgent, But Is It Really Important? May 16, 2016
- April 2016
- March 2016
- February 2016
- January 2016