4 Steps In Wealth Creation
What Is Wealth?
Everyone has a different idea of what wealth is. For some, it means owning property; for others, it means having lucrative investments. From a financial standpoint, the term wealth is the number of assets you own minus debts.
Almost everyone probably wants to become wealthy at some point in their lives.
Building wealth may seem somewhat impossible, but it is actually quite simple. In fact, you don’t have to earn six figures to turn this dream into a reality. No matter how old you are, you can amass wealth as long as you’re determined.
Basically, to accumulate wealth over time, you need to have strategic planning. Set a goal, analyze when and how you can achieve the goal.
1. Managing Your Debt
Managing your debt and expenses is the most important step, to begin with.
Discard Your Debt. Before starting a wealth building plan, get rid of all of your unsecured debt [credit cards] and work toward paying off car loans and other personal loans. If you don’t attack your debt, the interest you owe on your debt could effectively cancel out your savings. Better to get rid of your debt faster, than start building wealth.
​
Debt –whether it’s credit card debt, mortgage debt, student loan debt or any other kind — can pull you down every time you try to build your fortune. You can start by paying off high-interest debt, so you can save money and start building wealth.
Go for debt consolidation if you need to, it may help to manage debt more effectively.
2. Improve Your Earning
This step may seem elementary but is the most fundamental one for those who are just starting out. Having multiple income streams is the most fundamental step to building wealth.
​
There are two basic ways of making money: through earned income or passive income. Earned income comes from what you do for a living, while passive income is derived from investments or running a successful side hustle to increase your income.
​
3. Save More Money
Simply making money won’t help you build wealth if you end up spending it all.
Create a Budget - A budget is your financial plan, Record your every expenditure, no matter how small; many people are surprised to see where all their money goes.
Set a savings goal - Once you have a reasonable idea of how much money you can set aside each month, try to stick to it.
Build an Emergency Fund - . Life’s little emergencies [as well as big ones] can cause you to plunge into debt faster than you can even imagine. Set aside 3 to 6 months of your annual salary in a special account and only draw upon the funds in an absolute emergency.
If you incur debts, your wealth starts diminishing.
4. Invest Money As Soon As You Can
The importance of wealth creation can be summed up by a statement made by legendary investor Warren Buffet – “If you don’t find a way to make money while you sleep, you will have to work till you die”. What he meant by this statement is that one of the key objectives of wealth creation is the ability to generate wealth passively by investing money that has been earned previously.
At the most basic level, wealth creation is just about growing your money to achieve various short, medium, and long-term financial goals.
If you aren’t already familiar with the various types of investments, it’s worth spending a little time reading up on them
