Hello. My name is Martize Smith. I’m a published Arthur with a background & Master’s Degree in Finance and Economics. I created this blog post to help simplify wealth creation.
In this blog, you will understand in greater depth how to create wealth. Wealth, according to the dictionary, is an abundance of valuable, possessions or money.
In other words, wealth can be seen as passive income that exceeds living expenses. Here’s an example you know you are wealthy when you can quit your job and you still have income coming in that pays for your expenses. The core of building wealth is summed up in three steps.
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Wealth Explained
Step one you need more ways to generate income. Aim for 4 income streams that in total exceed your cost of living. For employees, they get paychecks. For business owners, they receive revenue. Step two savings.
Savings is what needs to occur as you make income, you make income, then have portions you commit to saving. Step three investments. Investments are what save money can buy. That makes you more money. So altogether, you make income. Then you designate portions to save.
Then you use the saved cash to invest to create more money. Here’s a quick example. This is a general approach to building wealth. Step one decide on the exact money that you desire. Step two give something like time spent reading more about wealth, such as one or 2 hours a day.
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How to Acquire Wealth
To acquire wealth, you become more knowledgeable, so you can then use the knowledge you have to make more money in the ways that you read. Step three set a specific date as an estimate of when you plan to acquire it.
This is a forcing mechanism, so as you set a deadline, this pushes you to get things done in a timely manner. Step four write out ways to acquire the level of wealth you seek on paper. Step five review your writing weekly or daily to ensure your actions are in alignment with your plans. This is an absolute critical part to wealth creation is the importance of risk tolerance.
Risk tolerance is an investor’s ability to mentally endure the potential of losing money on investments. Take an assessment to find your risk tolerance so this guides you as you get to the investment stage of building wealth. Risk tolerance also helps you to choose investments based on what your tolerance is and risk level. Flow charts are amazing tools to use.
I use them personally and this is something I would highly recommend. Flow charts are simple tools to use to help you see a financial plan in its visual form. Also in another way, it’s creative way of basically visualizing how you plan and will execute in stages step by step that lead up to your first investment or any such that you would like to be.
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Practical Wealth Building Steps
This is a practical example of a financial plan, in general. Start and save $1200 for an emergency fund or a reserve fund. Step two is to save extra money eight to twelve months of expenses.
Step three pay off portions of your debt and put cash in your retirement accounts. Step four, once debt is near halfway paid off, invest more in your retirement accounts. Step five start an education fund for your kids, if you have any. And if this applies to you. Step six invest at your highest amount possible in income producing assets for life.
I’m going to show you a few examples of income producing assets. But before, here’s a bonus. Consider compound interest. This is where investment vehicles can make money. You basically earn interest from your interest.
So that’s what the term compound interest means. So simply finding ways to pour your money into these kinds of investments is an absolute amazing way to become wealthy over time.
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Conclusion
So, going back to assets and income producing assets so what exactly is that? Basically, an asset is anything that puts money in your pocket. So, there’s a lot of different types, but here I’ve listed just a few different examples business ownership, real estate, paper and commodities. In conclusion, any financial plan is better than none.
Don’t be nervous but take financial freedom seriously. It’s a good idea to read books on wealth, save to invest more, build a passive income stream and most of all, enjoy the journey.
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