How To Build Wealth The Right Way: The 9 Ways To Build Your Fortune

Everyone wants to become wealthy at some point in their lives, and sometimes going about on how to build wealth becomes a mystery to most people. In this article, I’m going to explore the best ways you can build wealth the right way from personal experiences and from studying some of the wealthiest people in our society.

What Is Wealth?

Everyone has a different idea of what wealth is. For some, health is wealth, and for others, it’s owning properties and investing. From a personal financial standpoint, the term wealth is the number of assets you own minus your debts. Your wealth can be calculated by adding the total market value of all your tangible and intangible assets, then subtract all your liabilities in the form of debts.

It is possible to build wealth from scratch, especially if you know how to build wealth the right way. Discipline and determination can help you achieve financial freedom. You don’t have to be earning six figures right off the bat to turn this dream into reality. The 9 tips to grow wealth is actually quite simple to understand, but keep in mind that building wealth is not an overnight process. Let’s jump in!

9 Tips to Grow Wealth

1. Setup Multiple Sources of Income

Whether you’re just starting to discover the world of personal finance or in transition, having multiple sources of income is the most fundamental step to building wealth. In this article, you will learn some of the ways you can increase your income and build wealth the right way.

Start your own Business

The rich and wealthy in the world are not employees, instead they’re business founders, business owners, and business entrepreneurs. Business ventures fulfills two aspects of wealth building: income and high returns on accumulated wealth. Thus, if you have a business idea that can increase your income, getting started is your first step. Your business venture doesn’t have to be big initially. You can start small and offer the services that you’re naturally good at. For example, with e-commerce becoming more accessible to most people now, you can create an entirely online-based business. Don’t limit yourself to yourself, you can hire people to run your online business for you as an option as well.

Consider Running Side Hustles

Even if you have a day job, you don’t have to rely on your paycheck as your sole source of income. You can run a successful side hustle to increase your income sources. You can turn your talent or hobby in exchange for money during your free time.

There are many lucrative side hustles you can run online include:

• Working as a virtual assistant

• Freelance writing and editing

• Copywriting

• Coaching and/or consulting

• Web design/development

Other side hustles the traditional way include:

• Part-time teacher

• Freelance bookkeeping, tax preparation

• Tutoring

• Pet sitting

• Personal shopper

• Part-time driver or delivery service

Upgrade Your Skills or Acquire New Skills

There are many ways you can grow your income and investment returns. You can lower your expenses or increase your income sources. Yet, one of the ways often overlooked by most people is upgrading their skills or acquire new ones. This could mean getting a degree, an MBA, or earn special designation, which in turn earn you a promotion and/or increase your salary.

Consider Qualifying for High-Paying Jobs

The US Bureau of Labor Statistics is a good resource for detailed occupation database. You can see the high-paying jobs and their subcategories that you can consider applying to. There are hundreds of professions that pay an average of not less than $80,000 per year. Some examples of professionals with high paying jobs include physicians, managers, nurses, and engineers. Yes, these professions are very expensive to get into. They may also take some time to complete the required coursework, thereby it can take you even longer before you start earning a high paying salary. Whichever career path you choose, make sure that you don’t incur any student debts.

2. Establish Savings Routine

To save money is another crucial step in building wealth the right way. Once you have enough income to manage your basic needs, it’s time to save money. Saving small amounts regularly compounds to substantial wealth over time.

Create A Budget

Budgeting is a form of financial planning. Estimating your expenditures versus your income is the goal of budgeting. A budget is an important tool in wealth creation. Once you’ve identified your expenditures, then you can cut on them to increase your savings. Your goal is to maintain a feasible budget. A budget can be monthly, quarterly, or even yearly. Can you imagine a car without a steering wheel? That’s what a person who spends their money without a budget is like. Such a person will likely suffer a devastating financial crash. One of the most effective budgeting tactics is the 50/30/20 rule. This method recommends you to spend 50% of your income in essential items like food, rent, and/or healthcare. 30% is allocated to non-essentials like shopping for your wants as opposed to shopping for what you really need. And the remaining 20% is allocated to pure savings.

Live Below Your Means

To cut spending on unnecessary things like eating out, buying designer clothes, and regular vacations means controlling overspending and dramatically impact your ability to build wealth the right way. While being frugal can be boring, you’ll potentially amass wealth over time and reap the reward of saving money effectively.

3. Invest Some of Your Saved Money

Once you’ve set aside a monthly savings goal, it’s time to invest. When you invest your money, it gives you more money in return. Investing your income into the stock market, real estate, and retirement accounts can build you massive wealth over time.

Stock Market

Buying company shares is one of the best and straightforward ways to build wealth the right way. Becoming part owner of a company through shares, you become a shareholder, which means owning a piece of the company. Buying stock through exchange-traded funds is another form of a transparent and risk-free form of investment. ETF’s are passive funds that is less volatile because they help investors evade high taxes and fees. They allow you to diversity your equities. ETF’s are collection of many individual stocks from various companies, and ETF’s are grouped into different markets such as emerging markets, technology markets, and/or even real estate markets. Investing in stocks have the best return on investment compared to other assets. With a well-informed and diversified strategy in the stock market, you can lower the risks while maximizing your returns.

Real Estate

Investing in real estate gives you potential to profit from the real estate industry without being directly involved in it. REIT’s are essentially real estate company stocks that buy and sell properties. Mortgage companies fall into this category. As the company increases its value, so as your gains. You can also reinvest your REIT’s returns to boast higher dividends rate by way of compounding interest.

Roth IRA

An individual retirement account such as Roth IRA allows for tax-free withdrawals, as long as you meet certain criteria and conditions. Investing in a Roth IRA is a perfect option if your employer doesn’t offer a 401(k). The 2021 contribution limit per year is $6,000 for people under 50, while those 50 and above can contribute up to $7,000. One of the main benefits of having a Roth IRA is that you fund your policy with after-tax dollars, unlike a traditional IRA, where you fund your policy with pre-tax dollars. What this means is when you’re eligible to access your Roth IRA account, you will not have to pay taxes on your withdrawals.

Certificate of Deposit (CD)

CD’s are a safe and risk-free form of investment. The only drawback is that you have to leave your money in them for a few years. That is why CD’s are not as a good as a source of emergency funds. They are not quite as easy to liquidate. However, what make CD’s less risky is the fact that they are normally FDIC-insured. The interest rates are lower, but CD’s will help you sleep at night.

Depending on how much you dedicate to this pool of money, you might want to consider something called CD laddering, where you can protect your money from being tied up for too long. It allows you to invest your money for different lengths of time ranging from six months to five years.

Indexed Universal Life

The Indexed Universal Life or IUL is a tax-free savings plan authorized by the IRS Section 7702 and 72e for college funding insurance policy. IUL allows you to earn interest on your savings without having to pay taxes, borrow against your IUL, guarantee no loss, avoid market volatility, setup retirement savings, and have protection with death benefit or living benefits.

What is Indexing Strategies? An index is a statistical composite that measures changes in the financial markets. Indices are hypothetical portfolios of securities designed to represent a certain market or portion of the overall market.

Benefits of Index Interest Accounts include:

• Built in safety – no loss during market downturn, therefore you’re guaranteed not to lose any money

• Upside potential/ability to earn interest based in part of the performance of the external index

• Some of the most popular indexes include S&P 500, Barclays Trailblazer Sectors 5, Nasdaq, Dow Jones, US Real Estate, Gold Commodity, ML Strategic Balance, PIMCO, MCSI, and Russell 2000

4. Manage Personal Debts

Paying off your debt whether it’s credit card debt, mortgage debt, student loan debt, or any other kind of debt can pull you down every time you try to build wealth. You can start by paying off the highest interest debt in your name first and move down to the lowest interest debt that you have; this way, you can save money and start building wealth the right way.

The first step in repairing your credit is to gain control of your spending. This requires serious consideration on lifestyle changes. If you already have credit debts, pay them off and stop charging things you don’t really need and find ways to reduce the amounts you owe.

Limit the number of credit cards you have. You should have at least three but no more than five. Know your “Utilization Ratio” and keep it as low as possible. Never use more than 30% of the available credit limit on any of your credit card. Finally, check your credit report to make sure your card limits have been reported accurately by the credit card companies.

5. Setup Emergency Fund

Wealth is a person’s ability to survive so many number of days forward, or, if you stopped working today, how long could you survive? You cannot predict financial emergencies, but you can prepare for the impact they will have on your financial situation. Preparing for the worst-case financial scenarios allows you to be flexible enough to meet whatever situation comes along. Create an emergency fund and set aside enough money to use during unexpected emergencies such as loss of a job or a car breakdown. Your emergency fund should have the minimum amount of money you would need to cover your expenses for a month. Three months is better, and you should work toward establishing that goal.

Do not use any form of credit as an emergency fund such as credit cards or payday loans because adding to your debt will only make matters worse for you since your goal is to get out of debt in the first place. Typically, your emergency fund should be kept in a savings account so it is liquid or readily accessible on short notice. By leaving it there, you will collect at least a small amount of interest while your money is waiting for any eventualities. To avoid missed opportunities on losing interest on your hard-earned money, don’t put too much into your savings account.

6. Become Cash Flow Smart

In Robert Kiyosaki’s book “Rich Dad Poor Dad,” Robert discussed extensively on the conept of cash-flows of the rich and wealthy. He said that most middle class focus on jobs and salaries while the rich and wealthy focus on assets such as real estate, stocks, bonds, and even intellectual property (or skills and abilities). Your focus should mimic that of the successful people in the personal finance space instead.

Another tactic the wealthy use is the avoidance of financial liabilities as much as possible like mortgages, car loans, credit card debts, and student loans. The already wealthy avoid these financial burdens as they are sources of “money leaks.” Your goal is to keep financially afloat, and debts are a kind of leaks in your ship of financial freedom. So, avoid financial liabilities as much as possible.

Why the rich get richer? The rich and wealthy’s financial statement or cash flow asset column generates more than enough income to cover their expenses, and they re-invest their assets to produce more income while they reduce their expenses and liabilities at the same time.

7. Become Personal Finance Literate

It’s not how much money you make; it’s how much money you keep. The rich and wealthy acquire more assets while the poor and middle class acquire liabilities that they think are assets. So, you need to know the difference between an asset and a liability and acquire more assets.

The danger of relying solely on salary and wages is that the middle class finds itself in a constant state of financial struggle. As their wages increase, so do their taxes. Expenses of the middle class tend to increase in proportion to their salary increase; thus, most middle class is stuck in the “Rat Race.” They also treat their home and mortgage as their primary asset instead of investing in income-producing assets like owning a business or investing in the stock market.

To become financially literate means the difference between financial freedom and struggling financially. The typical source of income for the middle class is their paycheck. Their livelihood becomes entirely dependent on their employer, so when genuine financial opportunities come along, they can’t take advantage of them because they are working so hard, are taxed to the max, and are loaded with debt.

Once you understand the difference between an asset and a liability, concentrate your efforts on buying income-generating assets. That’s the best way to get started on a path to become wealthy.

8. Have Definite Financial Goals

Your financial goals should be well thought out and detailed. You need to know how to set both short-term and long-term goals. These include:

• Lifetime goals

• 3-year goals

• 1-year goals

• 90-day goals

These financial goals define your overall personal finance objectives. You will likely have several goals in each category. You need to think about the details and realistically set goals that you can achieve. Instead of saying, “I want to make more money,” determine specific amounts and build a plan to attain them considering where you are now and what stands in the way of your personal finance objectives. Your definite financial goals might look like this:

• Life goal: Retire at 45 with a minimum of $1 million in your portfolio

• 3-year goal: Have $100,00 set aside for investments that can create passive income in retirement

• 1-year goal: Pay off $18,000 of credit card debt

• 90-day goal: Reduce eating out and save the money for future investments instead

9. Wealthy People Have Insurance

On average, fewer Americans now have homeowners or renters’ insurance, and a staggering number of the middle class also don’t have auto insurance, even though it is required by law in most states. Wealthy people have insurance, and they recognize that a certain amount of insurance is absolutely vital to their personal finance big picture. You need to protect yourself in some key areas such as the five types of insurance you absolutely must have:

1. Auto insurance

2. Homeowners/renters’ insurance

3. Medical insurance

4. Life Insurance

5. Living Benefits insurance such as our Indexed Universal Life or Mortgage Term Life insurances

Our Indexed Universal Life (IUL) policy is one of the most popular products for our rich and wealthy clienteles. It offers protection in case they die too soon (death insurance), protection if they get sick along the way (living benefits), and protection from living too long (tax free retirement savings). And if they do eventually pass on, their IUL policy will be disbursed to their named beneficiary(ies) tax-free, thereby creating instant generational wealth for their family.

Final Thoughts

To build wealth is not that difficult to understand or do. With dedication and discipline, you can grow your wealth the right way. Before embarking on this journey, it’s important to equip yourself with personal finance literacy. That alone should give you practical advantage on how to eventually build wealth. Most middle-class overlook saving for retirement when it comes to building wealth, yet this is one of the most underrated strategies the rich use to accumulate wealth and create generational wealth.

The key to wealth building and financial freedom is your ability to convert earned income into passive and/or portfolio income. The already wealthy knows the differences in the three incomes that only the few knows. The rich and wealthy do not work for money; they know how to have money work hard for them. The three incomes are as follows:

1. Ordinary earned

2. Portfolio

3. Passive

Take action today. Choose to apply these 9 tips to build wealth the right way. You alone have the responsibility to help yourself no one else should or will. Share this knowledge with your children to prepare them for the world of personal finance. You and your children’s future will be determined by the choices you make today, not sometime in the future. Wishing you great wealth and happiness!