Wealth! Is there an easy way to attain wealth? Well, it depends on what easy means. However, if you want to learn how to build wealth and attain financial freedom, this piece is what you need. I'm also on the same route as many of us who want to become wealthy.
Everyone wants to be wealthy! Who wouldn't?
However, not many people achieve this status in their lifetime. Why? Because not many of us know what being wealthy means, let alone how to make it happen.
For most of us, going to school, getting that coveted degree, and landing your dream job always seem like the best way to become wealthy. But, in most instances, this trend only puts many people under more financial stress than financial freedom.
So, if this isn't the ideal way to achieve that wealthy status that everyone desires, what is?
Well, before everything else, we need to understand what being wealthy means and be able to differentiate it from being rich. This way, it can be easier to know how to build wealth from the little you've got.
So, first things first…
How to Become Rich: What it Means to be Rich?
Being rich is all about having a high income. Rich people make a lot of money. It's all about the cash flow for them.
This means that having a well-paying job can make you rich. As such, doctors, engineers, lawyers, and other such professionals are usually considered to be rich. They have a high income, and they can make money quickly.
Currently, the median annual income per household in the US is around $60,000. And anyone earning above this is certainly a rich folk.
For instance, the average income for a physician falls around $300,000. Now, this means that a physician can afford many of the good things in life with their salaries.
But is that enough? Does driving a good car, wearing the latest fashion, or living in a leafy suburb make you wealthy? The answer is an absolute no. There is more to this when it comes to being wealthy.
What does it Mean to be Wealthy?
While being rich usually means making a lot of money and living a decent life, being wealthy means more. For starters, it's not only about the money you can make every month, but rather the money you can spare from your income to save and invest.
Secondly, wealth is about making more than just money. It's also about accumulating assets that can generate passive income and sustain you and your family for years to come. If you lost that job, can you still make money even when not working?
And lastly, wealthy people are usually very strategic with their finances. They know when to save, invest, and make their money work for them. While rich people work for money, the wealthy ones let money work for them – to generate even more money.
The formula for being rich is usually like this: Net worth = Assets – Liabilities. Assets should always be more.
So, how can you become wealthy? Is it that complex?
The truth is, it might be easier than most of us can imagine. And today, we have just the right tips to help you crack that nut and start building wealth.
How to Build Wealth from Nothing: Crucial Tips
As we have said, wealth building requires you to create more passive income sources and let money work for you. And it's a process. You need to acquire assets that will not only generate some income for you in the future but those with a high chance of appreciating with time.
These assets can be in the form of property, investments, cash, or even digital real estate. Choose well, invest wisely, and you'll be on your way to being rich and subsequently wealthy.
Here are the best tips to follow to make this happen.
1. Get the Right Job
If you want to grow wealth, you must start from somewhere. You need capital to invest! And finding a well-earning job is the first step.
However, ensure that the job that you seek is also in line with your passion. This way, you can enjoy what you are doing and also have the motivation to work harder. Also, don't forget to negotiate for better pay and perks.
Remember, it's not all about the salary. You should also look at the company's benefits package and see if it fits your long-term goals. A good benefits package will include a 401k plan with employer matching, health insurance, and other retirement plans.
2. Plan Your Finances
The second step to take if you want to build wealth is to get your finances in order. You need to create a budget and track all your expenses. This will help you understand where your money is going and how much you can save each month.
You also need to have an emergency fund that can cover your expenses for at least six months in case of job loss or any other unforeseen circumstances. This will help you stay afloat as you look for other sources of income.
If you can't manage the little you are earning right now, it will certainly be hard to manage more money. As such, learn money management skills as early as possible. With the right personal finance skills, you can know the best way to spend your money, the best amount to save, and how and when to invest.
And you don't have to be a certified financial planner to do this. Reliable tools like Personal Capital are here to make things almost automatic for your convenience.
3. Cut your Expenses
Another crucial area you should look into when trying to save more money is your expenses. Track where you are spending your money and see where you can cut back. There is always room for improvement, no matter how frugal you think you might be.
You can start by cutting back on luxuries and little expenses here and there. For instance, you can cook at home more often instead of eating out, take public transport instead of driving, or shop at thrift stores instead of buying new clothes all the time.
The more money you can save, the more you'll have for investing. Eventually, you will have enough money to spend on whatever you want without worrying about spending too much.
4. Invest in Yourself
Investing in yourself is one of the best ways to grow your wealth. And the best part is that it doesn't require much money to get started.
You can start by learning new skills that can help you become more marketable and earn more money. You can also work on becoming a better version of yourself so that you can attract better opportunities.
Investing in yourself will not only make you more successful but also help you lead a more fulfilling life. And as you grow, your wealth will also grow.
5. Find the Right Investments
After achieving a good income, can manage your finances, and have saved some money, investing is the next step. And finding the right investment vehicles is the best step toward becoming wealthy.
There are many different types of investments you can make. But, you need to find the ones that best suit your goals, risk tolerance, and time horizon.
For instance, if you're young and have a long time horizon, you can afford to take more risks. In this case, investing in stocks or mutual funds might be a good option.
On the other hand, if you're older and closer to retirement, you might want to focus on more conservative investments, such as bonds or CDs.
The key is to find investment vehicles that fit your needs and then invest wisely. With the right investments, you can significantly grow your wealth over time and achieve your financial goals.
6. Avoid High-Interest Debt
One of the biggest obstacles to wealth is high-interest debt. This might include credit card debt, personal loans, car loans, or even student loan debt that you've not repaid. If you have any of these debts, it's important to focus on paying them off as soon as possible.
The reason is that the interest you're paying on these debts is likely to be much higher than the interest you're earning on your investments. So, it's important to get rid of this debt first so that you can focus on growing your wealth.
There are a few different ways to pay off high-interest debt. You can start by making more than the minimum payment each month. You can also consider transferring your debts to a lower-interest credit card or taking out a personal loan with a lower interest rate.
All this helps you to save money and stop overburdening yourself.
Wealth Building: Best Ways to Build Wealth
After mastering the above tips, it's now time to get into business. Here are the best options when it comes to building wealth.
1. Invest in Real Estate
Real estate is stable and will always offer the best opportunities for building wealth. In fact, this is one area that has made so many billionaires, Donald Trump being one of them.
There are many ways to make money in real estate. You can buy a property and rent it out, or you can invest in a REIT. You can also start your own real estate company or become a real estate agent.
Let's look at several ways you can make money here:
Someone might say, this form of investment needs a lot of money. And this is actually the truth! But, when the income starts rolling in, it will be all worth every coin you spend.
With rental properties, all you need is to get the required upfront capital (deposit), get a mortgage, and get things rolling. Usually, with a mortgage, you only need a 20% down payment, and the financier provides the rest.
But, always ensure that the location for the property is ideal. This way, you don't build rental properties in an area where no one wants to rent. Make sure you've done comprehensive research.
Crowdfunded Real Estate
This is one of the easiest ways of investing and making money in real estate. Generally, crowdfunding means pooling money from different investors to invest in real estate properties. And this means that every investor invests a different amount based on their capability.
Therefore, if you wish to invest in real estate but don't have enough funds to buy a whole property yourself, crowdfunding comes in to help. Luckily, there are numerous platforms that make all this possible.
For instance, you can try Fundrise, RealtyMogul, CrowdStreet, or DiversyFund. With some of these platforms, you can start investing with as little as $100.
Real Estate Investment Trust (REIT)
REITs are companies or firms that own or finance real estate that generates income for investors. It's a bit like a mutual fund but with real estate properties instead of stocks.
With a REIT, you can invest in office buildings, hotels, malls, and even apartments. And since it's a company, it's easy to buy and sell shares. This makes it one of the best investment options, especially for beginners.
What's more, REITs usually earn investors between 4% and 5% as dividends. This makes them a great source of passive income.
The best way to invest in REITs is to consider platforms like Acorns or M1Finance.
Commercial Real Estate
This is a bit different from the other types of real estate we've discussed so far. Here, you're dealing with non-residential properties such as office buildings and warehouses.
The great thing about commercial real estate is that it usually has a higher ROI than residential properties. And they also tend to be more stable. As such, your investment is less likely to go up in flames.
However, the downside to this type of real estate is that it requires a lot more money to get started. Also, you need to have some experience before venturing into this business.
But with a platform like Crowdstreet, you don't have to undergo too much hassle. The platform does the hard work for you.
2. Go the Stock Market Way
The stock market is also another great way of building wealth. And, so many people have made it their source of passive income.
However, while it offers an incredible opportunity for investors to make money, it is also a volatile market. So, you need to be very careful with the stocks you pick.
Here are a couple of things you need to do before buying stocks:
- Learn as much as you can about the stock market and how it works. This will help reduce your chances of making bad investment decisions.
- Set aside some money that you're willing to lose. Remember, the stock market is volatile, and anything can happen at any time. So, don't invest all your life savings in it.
- Diversify your portfolio by investing in different companies and sectors. This way, even if one sector underperforms, the others might make up for it.
- Have a long-term plan and be patient. Don't expect to make millions overnight. It takes time, and you need to be patient.
Generally, you can be an active or passive investor in the stock market. As an active investor, you'll be buying and selling stocks frequently. This requires a lot of time and effort.
On the other hand, as a passive investor, you can choose to invest in index funds or exchange-traded funds (ETFs). These are low-cost investments that track different market indexes. And since they're diversified, they help reduce your risk.
A platform like M1Finance is perfect for this type of investment. It gives you the chance to invest in ETFs with no commission fees. You can also try Personal Capital or Wealthfront. All these platforms will make your journey to becoming wealthy quite effortless.
3. Try Cryptocurrency
Cryptocurrency is the new kid on the block. And it's quickly becoming one of the best passive income sources around.
If you're not familiar with cryptocurrency, it's a digital or virtual currency that uses cryptography to secure its transactions. Bitcoin is the most popular cryptocurrency, which has made some of the richest people in the world.
What's great about cryptocurrency is that it offers a high ROI. In fact, some people have become multi-millionaires simply by investing in Bitcoin.
Due to its high demand, its prices shot up, reaching over $67,000 in 2020. As a result, those who had bought it at $2,000 or less a few years earlier made a huge kill.
However, just like the stock market, the cryptocurrency market is also quite volatile. Therefore, you need to be very careful with your investment decisions.
4. Retirement Accounts
A retirement account is also a great way to generate passive income. And the best part is that you don't even have to do anything for the money to start rolling in.
There are different types of retirement savings accounts, such as 401(k)s and IRAs. And each account has its benefits. So, you need to learn about them and figure out which one suits you best.
For instance, 401(k)s offer employer matching. This means that if you contribute $1,000 to your account, your employer will also contribute $1,000. This effectively doubles your investment without you having to put in any extra effort.
IRAs, on the other hand, offer tax breaks. This means that the government will not tax you on the money you make from your investments.
How to Use Credit to Build Wealth Fast
Sometimes, a good credit score is all you have in your name. You don't have enough capital to start your investing journey.
But that shouldn't worry you. In fact, many people have made it big in life by using credit well for their benefit.
Top Ways How to Use Debt to Get Rich and Wealthy
1. Buying Property
Acquiring properties through credit is certainly a positive move in wealth creation. How? You don't need to use your own money to invest in the property, except for the downpayment.
You can leverage credit to buy your dream property, be it a rental, commercial, or residential one, and pay in installments over time. If the property appreciates in value, you make a profit when you sell it. And for the rentals, you get to enjoy the rent paid by tenants after deducting the monthly loan repayments.
2. Creating a Business
Wealthy people are certainly not employed – they have their own businesses. Being your own boss gives you a better chance of becoming wealthy than when employed.
For instance, if you're employed, you only get paid for the hours you work. But as a business owner, your profit is not limited to the time you put in. You can make money even when you're sleeping or on vacation.
Of course, starting a business takes a lot of effort and dedication. But it's worth it in the long run. And one of the best ways to finance your business is through credit for startups.
3. Credit Cards
Credit cards can do more than just allow you to make purchases with no money. They are quite instrumental in creating a good credit score. And when the credit score is attractive, you can easily acquire financing for your projects.
And that's not all. You can also use credit cards to make money. For instance, you can sign up for cashback and rewards programs offered by various companies. Some cards, like the Capital One SavorOne Credit Card, offer as much as 8% cash back on purchases made.
Whether you use credit cards to build your credit score or earn money, you can achieve your ultimate goal of acquiring capital for investments. However, always ensure that you pay your credit card bill on time, lest you spoil your credit score and any chance of getting funds.
How to Use Life Insurance to Build Wealth
If you didn't know, life insurance policies could also be an excellent tool for wealth creation. This is possible through the “Cash Value,” which can be included in a permanent life policy.
So, how does it work?
A permanent life policy will have two parts – the Death Policy part and the Cash Value part. With the second part, policyholders can grow their wealth and savings over time. Also, they can access loans using their saving as collateral.
Usually, policyholders can get up to 90% of their Cash Value as loans. This means that you can use the money to invest and grow your wealth. Also, you can even withdraw some of the accumulated money to use for other wealth-creation activities.
The best thing about this approach to wealth creation is that saving here grows fast and can easily increase your accumulated wealth. Also, the savings enjoy tax benefits, which only add to your wealth. In fact, life insurance proceeds are tax-free.
How to Get Rich in 2023: Best Assets to Build Wealth
Building wealth is not hard if you have the right information and tools. And since we have already learned about that, let's now see the best assets to invest in to create wealth.
1. Real Estate
No matter what type of real estate assets you choose – be it residential, rental, or commercial – real estate will help you build wealth over time.
For instance, if you have some extra cash that you're not using, you can buy a rental property and get passive income from it. And if you don't have the money to invest in real estate outright, you can go for Real Estate Investment Trusts (REITs) or crowdfunding. These options will give you exposure to the real estate market without having to break the bank.
What's more, real estate is one of those rare assets that appreciate in value over time. As such, even if you don't use it for income generation purposes, you can still make a profit by selling it at a higher price than you paid for it.
2. Stocks and Mutual Funds
Another excellent way to create wealth is by investing in stocks and mutual funds. With stocks, you can either go for the long-term or short-term approach.
For instance, if you're bullish on a company's future, you can buy its stock and hold onto it for years until the price appreciates. On the other hand, if you're looking to make quick profits, you can consider day trades or go for penny stocks.
Mutual funds are also an excellent option for those who want to diversify their portfolios. With mutual funds, your money is spread across different assets, which reduces your risks. Also, mutual funds are managed by professionals, which further reduces the risks.
Cryptocurrencies have become quite popular over the last decade and are an excellent option for wealth creation. They might not be number one on our guide on how to build wealth, but they can undoubtedly make you good money.
The key to making money with cryptocurrencies is to invest early. If you get in on the ground floor of a new and promising cryptocurrency, you could see massive gains.
Of course, there's also a higher risk of loss with cryptocurrencies. So, if you're going to invest in them, make sure you diversify your portfolio and don't put all your eggs in one basket.
How to Acquire Assets
There are a few basic principles that you need to follow when acquiring assets:
- Invest early and often: The sooner you start investing, the more time your money has to grow. So, make it a point to invest regularly, even if it's just a small amount.
- Diversify your portfolio: Don't put all your eggs in one basket. Instead, invest in a variety of assets, so you can reduce your risks.
- Stay disciplined: It's important to stick to your investment plan and not get swayed by emotions. When the markets are down, resist the urge to sell off your assets. And when they're up, don't go overboard and invest.
How Many Millionaires in the US?
There are currently about 21,951,000 million millionaires in the United States. This number has been growing steadily over the last few years, thanks to a strong economy and rising stock markets.
The majority of these millionaires are self-made. They didn't inherit their wealth but rather built it through hard work and smart investing.
So, if you're looking to become a millionaire, don't be afraid. So many people have done it before, and you can also do it. All you need are the right strategies and the will to achieve.
How to Become a Millionaire with no Money
While it's certainly possible to become a millionaire with no money, it's not going to be easy.
The first thing you need to do is acquire some assets. This can be done by investing in stocks, real estate, or other businesses. Once you have some assets, you need to start generating passive income.
Acquiring assets without money is hard, and the best way to achieve it is through credit. So, start by building your credit. From there, you can take loans to start a business or buy properties and start growing your wealth.
How can I create wealth?
Some common methods of building wealth include investing in real estate, stocks and mutual funds, bonds, and peer-to-peer lending. Wealth creation is all about diversifying and making more income sources.
What does being wealthy mean?
A wealthy person is generally someone who has a lot of assets and generates a significant amount of passive income. Their net income is always higher than their liabilities.
What are some tips for creating wealth?
Tips for creating wealth include investing early, diversifying your investments, and being patient. Creating wealth takes time, so you need to be patient and let your investments grow.