Do you want to be wealthy? How do you define wealth? And are you creating wealth? These are important questions to answer to build real wealth. Wealth that includes financial wellness–how you think and feel about your life and not just about the numbers in your bank accounts.
Many people define wealth in a variety of ways. Have you met people who make more than you but still feel they do not have enough? Do you know anyone who can’t save money? Find yourself unable to pay off debt? Can you hear yourself making excuses for why you can’t invest?
No matter what criteria you choose to define wealth, it always starts with your mindset. Everyone has the opportunity to live wealthy but many lack the ability to create wealth in their lives.
In this article, we’ll explore how to create wealth to live your best life.
What is Wealth?
Wealth has many definitions. Many people consider wealth to be both tangible such as monetary riches or intangible like a wealth of relationships and spirit. I’d like to focus this resource guide on acquiring financial wealth.
If you’ve searched online for ways to create wealth, the search results are littered with get-rich-quick schemes or “experts” touting their riches and asking you to buy their course so you can learn to be rich too. Believing that money can easily be made is a good starting point because it can be. However, quick money or shortcuts offered by people and companies are not the paths to long-lasting wealth. Consider the following:
- You cannot make real wealth through gimmicks.
- Understand that wealth is a result of your mindset and actions. It requires knowledge, planning, and execution.
- To create wealth requires resources. Money is a resource. And so is time.
- Challenge the belief that it only takes money to make money.
From what I’ve learned and through my experiences, it takes resources and resourcefulness to make money. You can create wealth with money you make from your day job, money from side hustles, and from credit to finance a business or a rental property. You can also create wealth with time by offering services in exchange for money that would be used towards future money-making investments.
Wealth is Assets, Not Possessions
Your wealth is not based on possessions, but on appreciating assets. For example, it doesn’t matter that you own two cars that are depreciating in value. Instead, owning one car and using the money (that would have been spent on a second car) on income-producing assets is having a wealthy mindset. Become as excited about the size of your investments as much as you’re excited about the size of your SUV.
Shift your mindset to spend on income-producing assets, not possessions. Calculate your net worth.
Grow your net-worth
Your net worth is by far the most powerful number that determines your overall financial wellbeing. It’s a number that’s often overlooked in favor of higher credit scores.
Calculate your net worth by:
Net Worth = Assets (what you own of value) – Liabilities (what you owe)
Positive net worth means you have enough assets to cover your liabilities and have wealth. Negative net worth means you don’t have enough assets to cover your liabilities–you lack wealth.
Monitor and strengthen your credit score
Your credit score is important because it will determine how much leverage you can use to create wealth. Leverage is using credit or borrowed money to build equity by investing it at a higher rate of return. For example, a mortgage, business loan, call options, or margin debt is known as using leverage to create wealth.
Have multiple income sources
Income sources can come from multiple sources such as your job, an investment, a business, and government assistance. To build wealth, you must have multiple income sources. You cannot rely on one source of income.
Use your employee benefits
You can create wealth while working your corporate job. Many employers offer additional employee benefits aside from your salary. These benefits may include a 401(k) plan, employee stock purchase program, stock options, health savings accounts, wellness programs, tuition reimbursements, and student loan repayment programs. Determine what benefits are offered and take advantage of them to grow your wealth.
Invest money in the stock market
Make money with money by investing your money in stocks, mutual funds, and other funds. First, maximize your contribution to your 401(k) or other similar employer contribution plans. Second, invest in an Individual Retirement Account (IRA) with a brokerage firm. Finally, you can open a discount online brokerage account and start investing in stocks, mutual funds, index funds, or exchange-traded funds (ETFs).
Work with a fee-only financial planner
You don’t need to do this alone. In fact, you’ll need an accountability partner and this can be your CFP®, accountant, or financial advisor. There are some things worth the expense and paying a fee-only CFP® is one of those expenses.