Do you know how to build wealth? I’m no self-proclaimed financial guru; I’ll leave that to the experts. But I deal in black and white with a sprinkle of common sense.
If you’re curious about how to build wealth, I will give you an all too common scenario, one perhaps you will relate to. Do with the information what you will.
But I believe you will see the common sense sprinkled on top. I only ask that you take some and apply it to your life.
Table of Contents
How to Build Wealth Introduction
Do you know how to build wealth? Many Americans live paycheck to paycheck, and that’s no way to live. It’s stressful, and in times like these, it’s downright scary. There are traditional ways of making money. But what if there was a different way to teach you how to build wealth?
Who do you think is more wealthy: a person with $1M in the bank or $100,000 in their mattress (and a few other places)? In essence, what does wealth mean to you?
For some, it isn’t about the amount of money you have. Money doesn’t buy happiness. At least, that’s what they say. I want to try it out and see haha.
Our trading service is here to show you how to build wealth by teaching you how to trade. As a result, you’ll have a skill that lasts a lifetime.
Johnny Jackpot: A Familiar Story
Johnny hit the jackpot, so to say, with a windfall inheritance of $1M, and promptly went out and bought his dream car, house, and a few other toys. You may think he is wealthy and has $1M in the bank, but appearances can be deceiving.
First, we need to define the difference between money and wealth. Money is a currency defined in dollars, franks, euros, etc. The purpose is the same; it allows you to buy things. Think of wealth like this: How many days can you live before the money runs out if you quit your job?
We tend to think that Johnny, with $1M in the bank, would be fine for a while. But we don’t know that he has $4,000 a month in child support payments, a $10,000 mortgage, a $3,000 car payment, and monthly living expenses of about $6,000; that huge property is expensive to live in and maintain.
He’s forking out about $23,000 a month in living expenses. Let’s round that up to $25,000, for good measure, as wining and dining the ladies isn’t cheap.
It would take approximately 40 months for Johnny to blow through his $1M, essentially just over three years.
I will point out the elephant in the room here: Johnny inherited this money; he didn’t have a lick of it in investments. This could mean he doesn’t know how to build wealth. More on that later.
Savings Sandra
Let’s look at Sandra, a 37-year-old hairstylist with $100,000 in her mattress. As much as I hate recommending you put your money in the bank, it’s much safer there than in your mattress. Anyway, I digress.
Not only does Sandra have $100,000 in her mattress, but she’s also smart. At age 25, she bought her first home, which she promptly fixed and flipped.
She’s done that a few times and is now living mortgage-free. Besides a monthly cell phone bill, utility bills, and a modest car bill, which adds up to about $1500 a month, she is essentially debt-free.
So if everything went sideways for Sandra – which I hope it does- and she had to stop working, how long would it be before her money ran out?
If she were only to touch the money in her mattress, simple math tells us she’s got about 67 months before her money runs out, or 5.5 years.
But Sandra, being Sandra, has another card up her sleeve. On the sage advice of her wealthy aunt, at 17, she started investing a portion of her monthly income ($300) into an Index Fund.
It seems Sandra knows a little something about how to build wealth. Maybe she’s in our trade room every day.
How much wealth do you think she has accumulated now? To answer that question, I need to tell you about the 8th wonder of the world.
The 8th Wonder of the World
Do you want to know how to build wealth? Compound Interest. Let’s take our two friends, Johnny and Sandra.
As mentioned above, Sandra had the money to start investing at age 19. Yet, she only kept at it for eight years and stopped adding to the pot at the age of 27.
In total, she saved $28,800. This doesn’t seem like a lot of money. But, her money then compounded at 10% a year (roughly the historic return of the US stock market over the last century).
At 37, she would have had 129,207 dollars accumulated from a measly $28,800.
However, that’s not even the best part. By the time Sandra retires at 65, she will have a shocking $1,863,287. In other words, that modest investment of $28,800 has grown to almost two million bucks!!! Pretty impressive, huh?
That’s the awesome power of compounding. Over time, this force can turn a modest sum of money into massive wealth.
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Fastest Way on How to Build Wealth
When it comes to building wealth, we usually rush to get there. As a result, what’s the fastest way to go about it? Is it even plausible to think you know how to build wealth quickly? Many times, those get-rich schemes don’t work out well. Sometimes, budgeting, saving, and learning to trade are the best ways to build wealth. Remember, slow and steady win the race.
What If Time Is Not on My Side?
Don’t feel deflated if you didn’t get Sandra’s early start. Even someone who didn’t start until 27- investing the same amount each month ($300) and not stopping will still have a nest egg of $1,589,733!
Even though this is still a hefty sum, it is still $273,554 less than Sandra’s. Furthermore, he had to invest almost five times more money – $140,000, than the $28,000 Sandra invested. And he had to continue investing until the age of 65.
They say the best time to plant a tree was 20 years ago; the second-best time is now! So regardless of where you are financially, START INVESTING NOW TO BUILD WEALTH. Pay yourself first.
As you learn how to build wealth, take our free online trading courses.
Wisdom on How to Build Wealth
- The stock market is the best place to compound money over many years.
- The largest danger of the stock market isn’t a correction or a crash; it’s being out of the market.
- I was sitting on the sidelines, even for a short period, maybe the costliest mistake.
- “The best opportunities come in times of maximum pessimism” -John Templeton (by the way, he made a fortune buying cheap stocks amid WWII)
- What matters most isn’t where the economy is right now but where it’s headed. When it seems like the sky is falling, the pendulum eventually swings in the other direction. EVERY. SINGLE. BEAR MARKET has been followed by a bull market in US history, WITHOUT EXCEPTION!
- One common misconception about money is that you’ll become financially free if your income is high enough. No matter your income, financial freedom will NOT be a reality for you if your expenses outpace your income. Just look to Johnny for a reminder.
Where Should You Get Advice?
From the best.
Think of it like this: If you wanted to be the best race car driver in the world, would you go to your grandmother (apologies in advance, grandma) for driving lessons?
Nope, I didn’t think so. So why do so many of us hand over our hard-earned dollars to someone else to invest without question?
As I mentioned above, I am neither a financial advisor nor do I aspire to be one. But I know that one of the largest expenses in our life is taxes.
If you have money in an actively managed fund, you could lose up to two-thirds of your profits to fees and another 30% to taxes over time.
Please read the books “Unshakable” and “Mone and Master The Game” by Tony Robbins. He airs the dirty laundry on the actively managed funds and strongly supports Index funds.
In an analysis of 203 actively managed mutual funds with at least $100 million, 96% failed to add value over 15 years.
Here’s another way to put this in perspective: an actively managed fund that charges you 3% a year is 60 times more expensive than an index fund that charges you 0.05%!
It’s totally up to you what you do with your money and investments, but you might want to keep what I wrote above in mind if you’re learning how to build wealth.
Swing Trade Watch List
How to Find Extra Money Each Month to Invest?
Finding extra money doesn’t have to be complicated. It just takes a bit of common sense.
- Call your phone/internet/cable provider and ask for a discount. I got my internet reduced from $120/month to $60/month as a “student.” Taking an online course counts as being a student; try it; it worked for me! Savings For The Year = $720
- I called my cell phone provider and threatened to take my business elsewhere. My threats weren’t addressed, so I took my $120 cell phone bill to another company, which only charged me $40 monthly. Savings For The Year = $960
- I was cutting my hair. Gasp. This was done more on a whim as I was pissed off that I couldn’t just get my hair cut at the salon. No, I had to pay for the dry and style at a tidy sum of $55. Me being me, I bought a pair of scissors and went to town. I’d probably get my hair cut every three months, so that’s a savings of $220.
- I used to have an issue with buying books, like way too many books. An average price of $25 each can add up quickly, even with one a week. Now, I go to thrift stores and pay a couple of dollars. And I have an impressive library! Savings = $1200 a year.
I think you get my point. The reality is this: You know where you’re wasting money; you don’t need me to tell you where that is.
Final Thoughts
You’re never going to earn your way to financial freedom. The real way to build wealth and riches is to set aside a portion of your monthly income and invest it.
Let compounding work for you. That, my friends, is how you become wealthy while you sleep and achieve true financial freedom.
The story’s moral: Be like Sandra, don’t be like Johnny.
I’ll leave you with these words of wisdom from Russian-American writer and philosopher Ayn Rand.
“Money is only a tool.
It will take you wherever you wish but will not replace you as the driver.”
