When it comes to building wealth, there’s an endless supply of advice and ideas to get there. If we really boil it down to the best wisdom, that which actually works, we can see recurring themes which have been passed down from many wealthy people through the millennia.
To sum it up, I’ve identified three timeless principles of wealth creation to remember (got these from one of the richest men of all-time, his name was Solomon):
These principles will lay the foundation of your path to wealth for the rest of your life.
You might not hear them discussed much, since they might not seem to have practical and immediate solutions to building wealth, but your adherence to their rules will make the difference between creating wealth or not over the long term.
There is nothing new under the sun—and that remains true for building sustainable wealth.
Do not believe the hype about shiny new objects, “advanced” intelligence, or better technology or innovation making “old rules” inapplicable.
Creating sustainable wealth takes sacrifice, patience, and discipline; in other words, hard work over a long period of time.
Principle #1: Desire
You might think I’m going to say “you gotta want it to get it”.
While you certainly need to set down the path to wealth and make an effort for it, the real path requires something deeper.
Wealth is not a finite game like a game of basketball, for example. Michael Jordan wanted a championship more than anyone else on the court, and so he willed his dominance into existence.
Since wealth impacts our entire life, it is less like a finite game—with a clear starting and ending point and clear winner and loser—and more like an infinite game.
Infinite games are very different because there are no set rules.
You are not competing with others to win or lose with wealth. At least, you certainly don’t have to, even if that’s not the approach most people take.
What’s great about wealth and personal finances is that, well, it’s personal.
What looks like “winning” to you might not look like “winning” to me, and vice versa.
If one man’s trash is another man’s treasure, one person’s expenses and splurges is another person’s liabilities. We could disagree about how much to spend on a car or house to find the best utility from these items, and so my winning choice on the house I buy might look like a losing choice to you, and vice versa.
If you treat wealth like a finite game, one where you have to constantly chase victory, you will end up like a hamster on a wheel rather than a person who created real wealth.
If Michael Jordan was on a hamster wheel rather than basketball court, he’d find a much different result no matter how hard he wanted it or how much he grinded.
Wealth creation is very similar…
You will never have wealth and will be endlessly creating wealth if you don’t define the game you are in. The hamster wheel of treating wealth like a finite game will make it so you will be enslaved by your wealth journey rather than actively experiencing true wealth.
Curbing desire is a very key principle
You must define what wealth means to you in order to make progress getting there because…
- You have to spend less than you make in order to build wealth.
This means you have to keep your spending desires in check, because guess what; there is an endless supply of material goods and services in this world.
If you “want it all”, you are guaranteed to always spend to your limit, which means never building wealth.
Every economic decision has tradeoffs.
Do I want this state-of-the-art car now, or would I rather delay gratification in order to potentially have more money to spend later?
This is a classic decision you must constantly face when you are managing money to create wealth.
The tradeoff of economic utility now versus more choices later… leaks into every opportunity to spend, save, or invest—and ultimately determines whether you build wealth or not.
Principle #2: Patience
Patience is an underrated skill these days because it really:
- Makes the wealth creation process more enjoyable
- Keeps you from losing progress through poor decisions
If your path to financial freedom is more enjoyable, you are more likely to stick with it and maintain good habits. Good money habits are essential to wealth creation, and so the more you enjoy the process, the longer you can maintain good habits—and even improve those habits for even better results.
Being in a hurry to build wealth means you won’t enjoy the process. That’s the definition of impatience.
The more in a hurry you are, the more miserable you will become, until one day you might just give up and never build wealth at all.
Secondly, patience keeps you safe.
The path to wealth creation has tons of potential snares. The world is filled with fraudsters who are happy to prey on your desire to get rich quick.
When you are impatient you are likely to be more foolish, more willing to take foolish risks, and more susceptible to marketing which is geared to play on your impatient emotions.
Whether we are talking about get rich quick money schemes in the investing world, pyramid schemes which extract money from you rather than earn you money, or straight up fraudulent ponzi schemes which present profits that are too good to be true, you will continuously lose progress in your wealth journey by seeking out behaviors which you think will shortcut your progress.
Building sustainable wealth takes time, and that’s because (A) you have to work hard to earn money and (B) need to give your savings time to multiply on itself (through compound interest).
Neither of those things will be in focus if you don’t have patience on your path, and that will lead you into poor, foolish decisions and efforts.
Don’t forget, a fool and his money are soon parted.
Principle #3: Discipline
I’m sorry but it’s incredibly difficult to lazy your way into wealth.
Now, once you hit a certain level of wealth (particularly if this means you are already financially free), you can use the income from investments to fund a lifestyle while also seeing your wealth increase.
That’s the power of investing.
However, until you get to an advanced level such as this, you’re going to have to work hard to make money. That requires discipline.
Discipline means picking what might be hard now, like good old fashioned work, instead of leisure.
Even if you finally find a job where you can coast, it’s going to be very hard to build the skills to get hired without discipline.
(I’m not talking about immoral or illegal ways of building wealth here).
One of the cold hard truths about money and investing is that it takes money to make money. And for the vast majority of people, it takes hard work to make money.
Outside of getting extremely lucky (with the lottery or some get rich quick investment), you’re not going to create sustainable wealth without this key principle.
It might seem like everyone gets wealthy without the discipline…
But that’s because the “inspiring” stories of people who got wealthy, by being lucky, sells clicks. If you look at the statistics, the overwhelming majority of wealthy individuals are not there from luck, but skill and discipline.
Even the athletes or celebrities on social media have had to exert enormous amounts of discipline in order to get where they are today; it just might not be obvious until you peek under the hood to see how success really happened for them.
A No-Nonsense Wealth Creation Plan
So maybe you’re somebody reading this who wants to know how to build wealth from nothing. You want a plan forward.
Here’s some tangible steps you can take.
1—You have to start spending less than you make, and get there as soon as possible.
It’s a common feeling to think we don’t get paid enough to survive. But go back to your desires again. How many of your expenses that you deem “necessary” are actually just excessive?
Yes you need a reliable car to get to work. But do you need a luxury vehicle, or even a new car with low miles, in the same capacity?
Paying hundreds of dollars a month to save maybe a few hundreds of dollars a year on car repairs is not smart finances. Driving a more convenient, newer car is a luxury and not a necessity.
And don’t give me that crap about not wanting to get stuck on the side of the road.
With a cheap AAA membership (maybe $100 a year or less), you can get almost instant roadside assistance for that old hunky dunker car which will save you hundreds on your budget that can go directly into saving more than you spend.
For more great tips on reducing your expenses, check out these great posts from our team:
- Helpful Tips and Habits for When You are Broke
- Save On Your Electric Bill with These Unconventional Tips
- What Are the Rules on Your Income to Rent Ratio in Today’s World?
- 11 Surprising Ideas for How to Save Money On Vacation Easily
- Financial Independence Isn’t Hard – It Starts with Knowing How to be Frugal!
2—Invest a little bit of what you can save as soon as possible
Compound interest is incredibly powerful even if you don’t have much money to take advantage of it.
An example I always like using is the $150 per month goal. Did you know that if the average 25 year old invested just $150 per month in the stock market, and made just above the long term stock market average (11% per year), they would have $1 million by age 65?
That’s right, saving a grand total of $72,000 can turn into $1 million, simply from those small and seemingly insignificant 11% annual returns on your money.
It’s just math.
Like a snowball, investment returns build on themselves and gain incredible momentum as it rolls down the hill—though it does take some effort in the beginning to get the ball rolling.
I highly recommend reading through some other examples about compound interest, and really diving deep into how to make the stock market work for you; it doesn’t have to be rocket science but you do need to learn the basic principles.
And don’t come @ me with “I can’t save $150 a month”.
Many people can, as many people spend much more than that just to have the latest iPhone, which again, is not a necessity; it’s a luxury.
3—Invest in yourself to build your income higher
This is also highly underutilized and requires you to switch from a victim mentality to taking the reins of your life.
That said, there’s great power in educating yourself and learning better skills to improve your lot in life.
I’ve seen too many people completely transform their income, even at late stages of their career, in order to make a lasting impact on their wealth journey.
Don’t sleep on the opportunity that America affords mostly everyone, especially through entrepreneurship.
Learn the skills, be patient, and watch yourself utterly surprise yourself in 5 years through some good old fashioned hard work, discipline, patience, and knowledge.
How to Get Where You Want to Go
All of this advice is great, but you have to actually know where you’re going in order to get where you want to go. Like the wise cheshire-cat in Alice in Wonderland said,
“If you don’t know where you want to go, then it doesn’t matter which path you take.”
This is so applicable to wealth creation as it is to anything else.
The information is out there, especially in today’s world with the internet; the problem is that many of us are too proud and think we have the world all figured out through all of our experiences.
The reality of the world is that it is complex, and getting naturally more complex with each technological advancement.
All of our advancement means huge opportunities that pop up every single day.
So pick an opportunity, and chase after it.
Find the humility to understand you don’t know everything there is to know, and take encouragement that there’s plenty to learn from so many generous people on the internet (and even around your life right now) to give you the action steps to get where you want to go.
The problem is that only when the student is willing will the teacher appear.
Even our website is a great place to start, for free.
So go out there…
Set your expectations right, follow the key principles of wealth creation I’ve outlined here, and then finally take the initiative to walk down the path to financial freedom yourself.
Your journey won’t be perfect, and you’ll have mis-steps and setbacks along the way, but you will find great satisfaction in your path as long as you take an honest effort to get there.
You can do it. I believe in you.
Change starts today.