Our concept of wealth has evolved over the ages. It was once seen as a physical commodity that could be touched and held. Today, riches are seen as more intangible, such as stocks, bonds, and other financial assets.
Our understanding of wealth and how it can be used has changed over time. In the past, our grandparents saw it as evil. Our grandparents see wealthy people as someone who cheated. They believe that the rich are only wealthy because they take advantage of others and do not deserve their money.
This view is not only unfair, but it is also inaccurate. Many rich people are self-made and have worked hard for their money. Just because someone is wealthy does not mean they are a terrible person.
We now understand that building wealth is essential to a comfortable life. After all, money gives us choices, and choices provide us with power. With wealth, we can choose where to live, what kind of work to do, and how to spend our free time. We can also retire early and enjoy our later years without worrying about money.
Compound Interest
It accrues on the initial principal investment and the accumulated interest of previous periods. It can work for or against you and is a strategic partner in building wealth.
The key is understanding how it works and then using it to your advantage. The power of compound interest comes from the fact that the interest you earn in each period is added to the capital so that the total amount of money you have grows exponentially.
For example, let us say you invest $100 at an interest rate of 10%. In the first year, you will earn $10 in interest, and your total investment will be worth $110. In the second year, you will earn interest on the original $100 plus the $10 interest for $11. Your investment will now be worth $121.
In the third year, you will earn interest on your original $100 investment and the $10 and $11 in interest you gained in the first and second years, respectively. You will earn $12.10 in interest during the third year. Your investment will now be worth $133.10. As you can see, your investment grows more significantly each year than the previous year.
This interest can be used to your advantage if you have a long-term goal, such as retirement. The sooner you start, the more time your savings has to grow. For example, if you start saving for retirement at age 25 and save $200 per month, you will have $1,040,000 by the time you hit 65.
The Comparison Mindset
Are you serious about building wealth? If so, you should not compare yourself to others because wealth is relative. What may be a lot of money to one person may need more for another. So, when you compare yourself to others, you are not comparing apples to apples.
Comparing yourself to others can be harmful because it can lead to envy and jealousy. These emotions can sabotage your efforts to build wealth. Instead of comparing yourself to others, concentrate on your financial goals. Set your sights on your goals, and do not let anything or anyone stand in your way.
Conclusion
Key concepts to remember when building wealth: save regularly, invest wisely, and keep your expenses in check. Following these simple tenets can lay the foundation for a bright financial future.
Or better yet, you can tap into the expertise of New Wave Financial Planning. We can guide you through building wealth, no matter what stage you are in. So, contact us now to schedule a consultation!
