Do you want to be wealthy? How do you define wealth? And are you creating wealth? These are important questions to ponder and answer to truly build long-lasting wealth. We’ll explore the wealth in detail in our Ultimate Wealth Creation Resource Guide.
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.
Before you can build wealth, you want to know where you financially stand today. Budgeting is an important process to determine the in-flow and outflow of cash, your income, expenses, spending, debt repayment obligations.
- Download our Financial Assesment Worksheet
- Monitor your finances and track your progress for free with Personal Capital or Mint
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)
A positive net worth means you have enough assets to cover your liabilities and have wealth. A 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.
- Keep Your Day Job While Starting a New Hustle to Earn Extra Money
- The Difference Between Active Income and Passive Income
- Why You Need to Prioritize Having Multiple Income Streams
Take advantage of your employer benefits
You can create wealth while working your corporate job. Many employers offer additional benefits aside from your salary. These benefits may include 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 into 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).
- Investing for beginners guide
- Investing basic terms to know
- Open an online brokerage account with Ally Invest
- Start investing in ETFs with as little as $5 with Stash Invest (read Stash review)
- Buy stocks through Robinhood and receive a free share of stock (read Robinhood review)
- Invest your change from purchases through Acorns keep the change (read Acorns review)
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.
Recommend books to read to create wealth
- Rich Dad Poor Dad by Robert Kiyosaki
- The Millionaire Next Door by Thomas J. Stanley
- The Automatic Millionaire by David Bach
- You Only Live Once: The Roadmap to Financial Wellness by Jason Vitug