Most of us don’t think about money other than what we’re spending on and selling. But did you
know there’s more to money than just that? Unfortunately, so many of us have not been
told about the secrets of money. There’s a reason the 1% are at the level they are:
they know the secrets and they follow the rules. If you want to be a part of their
clan, here are some wealth building principles that you can follow too.
1. Invest in appreciating assets I know you’re wondering what appreciating
assets are. Well, they’re assets that increase in value with time. This includes the stock market,
bonds, and real estate. While most may be stacking up on liabilities, people who understand money are
purchasing appreciating assets. If you have a fully functioning phone but decide to buy
the latest iPhone because, you know, why not? This could be seen as a liability. Similarly,
if you are constantly loaning luxury cars, bags or clothes, you are also burdening
yourself with liabilities. If you would like to build wealth, you need to know that your
accumulated wealth is dependent upon what you do with your money. The idea is simple,
if you buy an asset at a certain price, over time, it appreciates in value and before you know it,
you’ll have something worth more than what you paid for. Since appreciating assets work through
the power of compound interest, they don’t just build linearly but instead build exponentially.
This means that if you invest $1,000 with a 10% interest, the next year you’ll be starting
at a base point of $1,100 and earning the 10% interest on that! As exciting as that sounds,
investing your money always comes with the risk of losing it. However, it’s better to risk it and get
a possible rise in value rather than purchasing liabilities with a sure decrease in value.
2. Avoid conspicuous consumption As much as we may get the urge to
fulfill our desires, nobody ever spent their way to financial freedom. Every day we’re faced with
the choice of deciding whether to give in to the consumption temptation today or be patient and
enjoy wealth tomorrow. Although tomorrow is never guaranteed, wouldn’t it be better to take the risk
of preparing for it rather than it finding you off guard? Let’s say you saw an advert about a
vacation deal or a discounted membership at the gold club, all these sound really great but may
result in a dent in your pockets. Like Frank Herbert said, “Seek freedom and become captive
of your desires, seek discipline, and find your liberty.” The choice is yours to make.
Consumerism causes your limited resources to be directed toward lifestyle and away from building
wealth. If keen enough, you’ll notice that wealth builders live modestly by spending less than they
can afford (in money, time, and energy). They do this to invest the difference for greater value
in the future. The reality of wealth is that it’s a form of delayed gratification. So if a flashy
lifestyle is your aim, then consumption becomes a priority which makes wealth eternally elusive!
3. Apply leverage to build wealth When you have leverage, you have the tools
to build wealth. You won't get wealthy by trading time for money, and you can't do it all yourself.
You can’t work like a donkey and expect to land on wealth. Leverage means you work smarter,
not harder. The beauty of this is that it comes in various forms, have a look at these:
a) Financial Leverage: This means that you can choose to invest and use other people’s money
without having to risk money from your pocket. b) Time Leverage: Involve other people instead
of exhausting the 24hrs you get in a day. c) Technology Leverage: Using other people’s
equipment to increase output. d) Marketing Leverage: When you
involve other channels, the reach is more comprehensive than a one-on-one approach.
e) Network Leverage: Using other people’s connections and approaches
to expand beyond your own. f) Knowledge Leverage:
Utilize other people's talents, expertise, and experience that you may not possess.
As you can see, leverage allows you to build more wealth than you could ever achieve alone
by utilizing resources that extend beyond your own! If you aren't using leverage, then you're
working harder than you should only to end up with less than you deserve. And if being wealthy
is your goal, using leverage is your best bet! 4. Detach yourself from things you don’t need
Remember we talked about liabilities earlier on? Well, they’re mostly what you need to
detach yourself from. These are material things that may offer you temporary joy but, in return,
mess with your financial prosperity. I mean, there’s no need of paying hefty car insurance
on a luxurious car when you’re struggling to make ends meet. Letting go of certain liabilities will
save you a lot in the long run. This doesn’t mean you live like a miser. No. Instead,
be frugal with your expenditure. Understand what makes you happy and enjoy it in moderation. It is
a matter of reevaluating priorities. For example, instead of paying for cable TV,
opt-in for a streaming service instead that costs way less. Liabilities are the reason
why you work so hard but don’t feel any richer with it. They give short-term satisfaction but
keep you from reaching your long-term goals. The best way to avoid getting things you do not need
is to create a budget that works for you. A great budget helps keep your liabilities in
check and save you from the terror that is debt. And if you’re interested, you can download my free
budgeting guide using the link in the descriptions.
5. Identifying Common Money Pitfalls All of us might, at some point, have fallen into
the hands of consumerism. We are often surrounded by businesses telling us why it would be great
to give them money in exchange for something. However, as you give them this money, you are
giving it away with no monetary benefit, all the while, they are garnering profits from your cash.
Society is designed for you to spend as much as possible yet provide a pinhole of opportunities
for you to gain wealth. Don’t believe it? Why is it that in school, we’re always taught how
to work hard and secure a good job instead of how to actually generate wealth and make money?
We’re not taught how money works. One of the major misconceptions that hold people back from
achieving their financial potential is the idea they need to trade their time for money. Why? The
system requires a majority of us to remain in this money slavery trade. Although landing a good job
may sound like a good fix, the problem is that an increased salary does you no good if you increase
your expenses at the same rate! Also, many find themselves blinded by student loans, credit cards,
and car loans that are all tied to interest rates. If you’re not careful, large balances can cripple
your finances for decades. Try to understand how interest works before committing to any
form of monetary aid or cushioning. 6. Know where your money is going
Every penny matters and if you don’t believe it, try working on a no-budget and see how bad
your debt situation will be. Applying this basic principle requires you to sit down and review your
spending habits. Something small such as looking at your bills instead of stashing or throwing
them away will help you understand every item on your bill. Any form of fun or recreational
spending should come after you’ve cleared your bills and funded your retirement and investment
accounts. You might be shocked at how much you’re throwing away by giving into guilty
pleasures. Understanding every single cost will also enable you to understand how to best manage
your money. If things are bad, you might come to find that you cannot afford to enjoy a latte every
morning or daily lunch takeouts. You might also come across some monthly subscriptions that you
may have forgotten. At this point of awareness, you’ll be able to understand the dynamics at play,
telling you how much everything costs and if you actually need them or not.
7. Automate, automate, automate! Sometimes it’s just simply hard to keep
up with the numbers and so, a hands-off approach is necessary, especially when it comes to money.
A good example is how your employer automatically makes your retirement contributions. You simply
don’t have to worry about missing out on a payment once it’s set up. So imagine automatically paying
for those credit card bills or sending money into savings from your checking account,
all thanks to automation. Not everyone has the discipline to keep tabs on everything,
especially when it comes to paying bills. Automation saves us the pain of being charged
late fees or unwanted interests. You wouldn't build a business without a proper business plan,
so why should you compromise on building your wealth? Design your wealth plan based on proven
business principles that lead to success. These principles include accurate record-keeping and
accountability, just to mention a few. 8. Be courageous
It’s human nature to be cautious when venturing independently simply because we are social beings.
However, wealth doesn’t come by following the crowd. It requires you to be an independent
thinker and take the risk others chickened out from. To put it in layman’s language, wealth
will come from doing what others won’t, so you can have what others never will. What you’ll need is
courage. It takes courage to be a self-starter and be self-responsible. With courage, you can
walk new paths and develop new skills. If you wish to stand out from the crowd, you need to be
courageous enough to put in the extra effort when others don't. Make financial freedom your number
one goal, and you will find that every other voice trying to discourage you is muted. Remember,
it takes courage to build wealth. It has little to do with money and more with wanting to achieve a
goal, so much that you make it your top priority. 9. Actively boost your income
Don’t be comfortable with a basic salary. Even the average millionaire has more than one stream
of income. If you want to begin building wealth in your life and for future generations, then it
is time to place a higher value on wealth creation in your life and get organized with your money. I
mean, why would you be given more money to manage if you can’t manage what you’ve got? If we were
to look into your wallet or purse, would you say the bills in there are well organized? If not,
then you need to first plan and work with what you have as you you’re your horizons to more ventures.
Look into avenues that can generate some passive income since a hands-on approach
could lead to burnout. You could also learn new skills and work on building wealth around that
in your spare time. 10. Be disciplined
I can’t stress this enough. Wealth is the cumulative result of many little things
added together and compounded over a lifetime. Your daily habits will either make you or break
you if you want to be successful. Most of us are victims of the number one success killer:
procrastination. You must begin the right habits today without delay, and this
requires discipline. With discipline, you overcome procrastination by starting today and persisting
tomorrow. The harsh truth is that there’s no substitute for action. You either do it,
or you don’t. What you’ll be left with are simply excuses. Don’t let anyone fool you, wealth happens
because you do what it takes to make it happen. Well folks, thank you so much for watching and
subscribing if you haven’t. With that said, have a great day, and see you in the next one.