Building wealth or wealth creation is simple. It doesn’t require luck, genius, or special connections. You don’t have to attend overpriced weekend financial seminars or learn the latest tricks and gimmicks sold by most marketers. “The secret is there are no secrets.” —John Bogle once stated wisely.
The truth behind how to build wealth is public domain knowledge, simple to understand and nobody is going to get rich selling it to you. In fact, it so simple it can be explained in just two sentences;
1. Make more than you spend and invest the difference wisely
2. Develop simple daily habits that result in wealth accumulation.
I know,,, you are probably a little disappointed. You want something new, different and clever; the missing ingredient that has held you back and will produce breakthrough results. The fact is wealth creation or building wealth is not a get-rich-quick scheme. You can get rich quick and still not be wealthy. Not all rich people are wealthy, but all wealthy people are rich.
So my number one wealth creation or building wealth principle is; Spend Less Than You Make and Invest the Difference. The first sentence summaries how to manage your personal finances so that you grow ASSETS. It explains the importance of creating positive cash flow that you invest to produce additional positive cash flow.
Notice how it is composed of three separate yet connected ideas to form a single concept:
1. Spend Less
2. Earn More
3. Invest Wisely
There are endless variations on how to achieve this objective; but they all follow two simple themes;
•You can reduce spending immediately through various forms of frugality
•You can increase your income through various strategies including changing jobs, getting a raise or starting a business.
In short, you must create a gap between how much you EARN and how much you SPEND that results in SAVINGS to INVEST for growth and additional income.
Frugality is about living on LESS and requires self-discipline. For most people, there is a feeling of sacrifice when following this path, thus making it difficult to succeed. If that’s you, then frugality is a slow and difficult path to wealth building and creation because you will be in constant battle between lifestyle desires and financial freedom goals.
For others, frugality is a pleasurable journey in simplification where fulfilment results from redirecting earned income toward financial freedom goals rather than squandering it on spending. It is common for extreme frugalists to save 70% of income and achieve financial independence in less than 10 years, but it is not everyone’s cup of tea
Another alternative is to RAISE the INCOME side of the equation. The advantage to this equation is there is no theoretical limitation to how fast your wealth can grow because your earning capacity is unlimited. EARN MORE MONEY!!!!
Most wealthy people create their wealth by increasing their income. It’s the fast path to wealth. So most of them build or create income generating assets and businesses that keeps making them money. The average millionaire has 7 sources of income. Think about it!
But however, you can increase your income to 7-8-9-figure income a month, if you don’t master the spending side of the equation, you still run a high risk of failure on your wealth building due to all-too-common mistake of allowing spending to rise as fast as income.
Now we have talked about;
1. EARNING MORE
2. SPENDING LESS so you can increase SAVINGS
3. INVEST WISELY
Kind regards,
PETER KWADWO ASARE NYARKO,
AUTHOR | FINANCIAL ADVOCATE,
CFLE, AFRICA.
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