Building wealth is a topic of discussion that can start a heated debate, promote those get-rich-quick schemes, or drive people to process transactions they might never have considered. How about the “three simple steps to building wealth”? Is it a misleading concept, too? The short answer is no.
According to the “three simple steps to building wealth” concept, to accumulate wealth over time, you need to:
- Make some money
- Save your money
- Invest some of your money
This article closely looks at each step in turn:
Make Money
A person can build wealth only if they have money, to begin with, so the obvious first step is to have a job that pays. Is this step simple? Not always. Particularly for young people, the first job might not provide much pay, so it might be necessary to take several jobs. The key here is to begin. A young person might start by delivering newspapers, mowing lawns, moving on to other small jobs, and eventually getting a full-time job. There are, of course, many ways to make money. Starting a small business is one possibility.
Save Money
Once a person has a regular income, the next step is to put some money aside. Saving money is also not so simple in these days of credit cards, high-interest loans, and other temptations that come with more dollars than one can ever hope to spend. Still, saving money is the second step. How should this be done? One way is to put the money into a savings account, preferably out of easy reach.
Invest Money
The third step is investing some of your savings or surplus income in a manner that will build wealth over time. This is not so simple, either. It would be easy to invest in a risky investment, with the idea that a short-term gain will be seen before the investment goes bust. The first two steps in this process require hard work, discipline, and sacrifice. The third step is no different. For example, how does one invest in an annuity? The first two steps are still needed. How can a person build wealth with an annuity? With an annuity, a person puts money aside so that it will grow over time. This can be done when the person is young and has a short time horizon.
A person can also use an annuity as an immediate income-producing vehicle. This is a different strategy than using your money to build wealth over time, but it still requires self-discipline and sacrifice.
Conclusion
Even if they’re just basically three steps, they can be pretty challenging. For one, finding the right job to help you start making money is already a challenge. Even getting to this point where you can start saving can be difficult for many, especially if they live paycheck to paycheck. Investing is an entirely different ballgame, too.
Because of the complexities of building wealth, it is highly recommended that you seek the help of a trusted financial adviser who can help guide you throughout your journey of building wealth.
New Wave Financial Planning is a financial advice firm on the Gold Coast that offers the tailored services of seasoned financial experts. Our financial advisors on the Gold Coast welcome clients from all over the country. Get in touch with us so we can schedule a meeting with you!
