Individuals seeking to build wealth have used a wide variety of methods, strategies and plans. There are tips about what you should do and what to avoid. However, building wealth is more intricate than simply saving money or investing in all the “right” places, whatever that means.
Building wealth is a way of living that requires fundamental tools that every person, including you, can have, starting with patience and discipline. Once you’ve got these tools, you are ready to dive into learning more about wealth building.
First, let’s define what wealth means.
What is wealth?
According to Merriam-Webster, “Wealth” means having an “abundance of valuable material possessions or resources.”
It’s the word “abundance” that means something different to different people.
For one person, having wealth means having the funds that allow them to live a certain lifestyle. Others claim that they have attained wealth when they are able to securely and permanently live off of the money they currently own with no continual income.
Determining what wealth means to you is an important, and often overlooked, step in building wealth. Without a specific goal in mind, wealth can seem impossible to attain.
Goals can keep you focused as you build your plan and will allow you to more fully celebrate specific monumental milestones along your journey. Remember, SMART goals need to be attainable and realistic. Making them ambitious goals won’t hurt either.
Why build wealth?
The most simple reason to build wealth is to improve your well-being. Like it or not, a person’s happiness is influenced by the amount of money they make.
Matthew Killingsworth researched human happiness as a senior fellow at the University of Pennsylvania’s Wharton School. Last year, he helped conduct a study of over 33,000 people which resulted in 1.7 million data points.
“When I looked across a wide range of income levels, I found that all forms of well-being continued to rise with income,” Killingsworth said. “I don’t see any sort of kink in the curve, an inflection point where money stops mattering. Instead, it keeps increasing.”
When people are struggling below the poverty line, an increase in wealth can provide somewhere to live and safety. As people within the next income bracket increase their earning, they can secure comfort and reliable resources. As income increases, people experience more and more benefits until they achieve full confidence and satisfaction.
Building wealth serves as a hedge against inflation.
Stability is one of the main reasons people build wealth. A steady income means a person will have reliable resources to meet their needs, and building wealth allows one to take care of their family and often secure their legacy.
When economic crises occur, it can be more difficult to rely on economic soundness. Recent inflation has had a damaging impact on many people’s happiness as they continue to watch prices rise.
In August 2022, the U.S. Labor Department reported that the United States’ annual inflation rate had increased by 8.5% in the past 12 months. It reflects “the largest annual increase since November 1981.”
According to a recent New York Times article, these high prices are holding firm. As uncertainty as to when inflation will decrease continues, more people have sought out new ways to build wealth. Fortunately, there are many.
Gold Alliance CEO Joseph Sherman said he believes that the American Dream of building wealth lives on. Sherman and his company are experts that assist individuals seeking to diversify their retirement funds with precious metals, and they believe that security matters.
“Historically, some of the most secure investments are found within physical assets,” Sherman said. “This is important to note since hedging against inflation comes from making the right investments and diversifying your portfolio with assets that will stand the test of time.”
As Sherman said, security is the way to combat inflation. As long as you invest wisely, your savings account will outlast economic hard times. Yet, you have to diversify your portfolio and determine the best ways to grow your savings.
What are the top three ways to build your net worth?
Once you have an idea of what wealth means and understand why building it is important, we can explore the top three ways you can make wealth-building a reality. While some of these steps may seem intimidating, with the right resources, growing wealth is possible.
1. Start a business.
Business owners are simply the wealthiest people. While starting a business might not be easy, anybody with an idea and a huge amount of fortitude can do it. You can even start a business without money, as long as you utilize the proper resources.
One belief that stops people from starting a business is the idea that they need a substantial amount of money before they begin. Researcher Thomas J. Stanley dispelled this idea in his study of 1,000 millionaires. He discovered that 80% of American millionaires are first-generation rich. In other words, these individuals did not come from money and built their own wealth.
Writer and business owner, Anne-Lyse Wealth, founded DreamofLegacy.com to help millennials build wealth with purpose. She has also interviewed many unlikely millionaires.
Wealth writes, “I believe the first step to attaining wealth — at least for people who are not born into it — is much more personal than building millionaire habits…I would argue that changing your mindset or building a mindset conducive to wealth, is the first step to attaining it. This means believing that wealth is accessible to you and believing that you are worthy of wealth despite the systems designed to keep it from you. Without that mental drive, the other strategies are basically moot.”
This ties back to the first point of this article that in order to build wealth, you must start with patience and discipline. Starting a business isn’t going to be easy. It takes determination, and if you face failure, you must be able to overcome it and learn from your mistakes. Having faith you can is the first step toward doing something amazing.
2. Choose to invest.
As wonderful as having a business would be for building wealth, it shouldn’t be your only source of income. Effectively investing can be a great option for growing your wealth over time.
If investing initially sounds tedious or overwhelming, know that you are not alone. There has been a significant increase in the number of people, particularly millennials, who are choosing to save rather than invest. This is largely due to misconceptions surrounding investing and a lack of accurate education and guidance on the topic.
If you are looking for a low-risk place to start investing, while you are still learning, consider micro-investing. Business analyst Portia Antonia Alexis defines micro-investing as “the practice of putting away small sums of money toward long-term or short-term investment goals. Micro-investing doesn’t require the investor to make any significant lifestyle changes or learn new saving habits.”
Micro-investing apps are a great resource that allows people to invest their spare change. Acorns is a popular option for new investors. This app rounds purchases to the nearest dollar and invests the change into a portfolio of ETFs. Bundil is a similar app used by individuals looking to invest their spare change in cryptocurrency.
3. Invest in yourself.
While investing your money is important, investing in yourself is even more critical. Having money will do you no good if you lose yourself along the way.
Financial journalist and money expert, Miranda Marquit, says, “What’s your best asset? When asked this question, your thoughts might jump to your home or to a stock that’s performing particularly well right now. You might even say that the business you are building is your best asset.”
She continues, “While these assets can certainly be valuable, the best asset you own is yourself. When you take the time to invest in yourself, you are building an asset that can benefit you throughout your lifetime. As long as you continue investing in yourself, you will have better opportunities to make money and enjoy life more.”
No other investment will have as direct of an influence on your life. Educating yourself will be one of the most meaningful investments you will ever make. While university education is a fantastic way to learn more, it is not the only way. Reading relevant books and learning from the example of real-life people, will make all the difference in your wealth-building journey.
Building a community and strong relationships with others is another great way to invest in yourself. Cheri Beranek, the CEO of fiber optic management company Clearfield, shared, “Once we invest in our personal strengths, we need to push them to the limits, so they can grow. A group provides an opportunity to give and take … Truly investing in yourself is never done in complete isolation. Nurturing healthy relationships gives us more stability in uncertain times — both financially and emotionally.”
No matter where you are in your wealth-building journey, there is always more to learn. Remembering this will help you stay humble and hungry for new information that will only benefit you long-term. Surround yourself with people who share your goals and keep one another accountable.