I was going to write a post on this very subject when I received this blog via my google alerts, I read it and thought, he's pretty much covered what I was going to say, so please read this blog it has some great content and if you take the action suggested then I think it could be in the near future that you are wealthier than you are Right Now!
To our Success! Loran
The 4 Steps of Wealth Building
The biggest myth about wealth building is that having a “high income” is the same as being “wealthy”. They’re not the same concepts. People with huge incomes are often flat-out broke.
If you keep up with financial news, you’ll hear almost every day about millionaires and billionaires going belly up. You’ll hear about celebrities having money problems even though their incomes are in the tens or hundreds of millions per year.
The reason for all of this is simple — being wealthy requires four steps, and not following any one of the steps will destroy your wealth. Income is just a part of becoming and staying wealthy.
I’m not going to try to reinvent the wheel here — I’m just going to organize the basic steps to wealth building in order to provide a framework for understanding how money works. For a more hands on approach to joining the upper class, check out our how to get rich guide — it’s short on hype and filled with real-world tips.
- Creation of Capital. This is the part most people have figured out — actually getting hands on money in the first place. For the vast majority of humanity, this is found in getting a job. For others, it’s in running/owning businesses or income-generating assets. This is just the first step. Examples: having a job, owning a business, owning dividend stocks, lending money at interest.
- Preservation of Capital. Capital, at least in most countries, automatically loses value with time. In the use, the rate is anywhere from 3-10% lost every year. Taxes take a chunk out of every dollar you earn. Risky investments can completely collapse. Everyone has to spend money on paying debts, obligations, many pay rent or mortgage, food costs, and dozens of other costs. Cutting these costs is essential. If you make 100k but lose 90k per year, you’re worse off than the cautious person who makes 60k but loses only 40k.
- Examples: cutting living expenses, refinancing a mortgage, using coupons, getting out of debt.
- Saving of Capital. Without savings, you can’t expand your possessions without debt. Being able to save money is outrageously important — whether you’re just managing your personal finances, or are running a business. Either you don’t expand or you use debt. Saving money is important. Cash is, and always will be, king. Examples: automatically putting 20% of your paychecks toward a savings account at a bank you don’t think about constantly. Out of sight, out of mind.
In the end, successfully completing all four steps isn’t easy, and can take years — or decades — to learn how to master. They are, however, the only sure path to predictable, systematic wealth building.
Written by Shaun Connell (Editor) http://standstrongresearch.com/wealth-building/
I would like to add:
Creation of Capital- What do you own that you could sell? What could you make/create that you could continually sell? What service or skills do others need or want, that you could provide? Thinking outside the box, what could you offer?
Preservation of Capital: What bills can you cut/consolidate? Can you car share, walk or cycle to work? Can you re-evaluate insurances and cut costs not coverage? Can you cut your daily cafe coffee down or weekly takeaways.Can you sign up for online frreebie samples sites and coupon sites? Can you recycle your clothes with friends at a fun party to gain new outfits? What can/will you do?
Savings of Capital: Direct debit straight into high interest account, Annual ISA deposits, How are you going to create your financial cushion.Remember the old saying, Money goes to Money!
Investment of Capital: As you probably know our investment strategy here at WaysToWealth is investing through our property portfolios and creating cashflowing investment properties, as well as providing capital. This is working very well for us and if you'd like to know how we do it, then Book up onto one of our courses and start making your own cash flowing property businesses.
Whatever you do after reading this: Please do something, even if it's only one thing!
Cut out the coffee, or put 20% of your wages away each month to build a wealth pot. The slightest constant positive action that you take can make a massive difference :)
Disclaimers: Nothing on this website should be construed as personalized investment or financial advice. This website exists for information purposes only. It's possible that we're wrong. We are not registered with the IFA. Responsibility for your financial decisions rests with you. This website also from time-to-time will receive compensation for advertising products and services. WaysToWealth has a disclosure policy: any time a writer has ownership or partnership with a company discussed, it will be disclosed in said article.
- Investment of Capital. Investing money is essentially putting your money to work to build more income. Buying farmland, dividend-stocks, a small business, getting extra certification for a raise — these are ways to invest your money to increase your income. Doing a bad job at investing guarantees you’ll lie an average or below average lifestyle — doing well can turn your life into a rags to riches story. Learning to invest properly is important on an almost unfathomable level.