It is safe to say that we have a personal finance crisis in America. Over the years, people have continued to get into credit card debt and the number of student loans taken out has gone up. Even in a time of such economic prosperity, people are still scraping by. How can this be? I believe this all starts with a lack of financial education and financial literacy. People do not know the basics of building wealth. Instead, they take out thousands worth of loans, hoping that they’ll one day get a job that will pay them back. In this article, I’m going to be breaking down the three fundamental steps of wealth building.
1. Make Money
Your income level is the greatest predictor of wealth building. If you are living on minimum wage, you will never earn enough money to build more wealth. You will always be living paycheck to paycheck. To build wealth, it all starts with increasing income. Whether it’s starting a side business, getting an extra job, or simply building another source of income. All of these things help in the long run. Learn how to make more money and keep your expenses to a minimum. The greater you can make this spread, the greater amount of dollars you’ll be able to leverage to create more wealth.
2. Keep Money
This is the main problem I see with the younger generation. Whenever they get a little extra money coming in, they are super eager to spend it. Instead of spending it, you have to build the discipline to put that money away. Whether you are depositing it into a sacred account or stuffing it under your mattress, both options are tremendously better than carelessly spending it on useless items that you really don’t need.
3. Invest Money
Instead of just saving to save, you have to learn how to save to invest. Whether it’s investing in your own business or investing in a fund, you have to do something. You cannot build wealth by just simply saving everything you have. Inflation will start to eat up at that money. Instead, you must find a vehicle and put that money to work. I’d recommend investing in something that you have control of and that you are knowledgeable in. A small business is a great place to get started.
All in all, these are the basic steps to building wealth.