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Wealth Building – 7 Secrets From the Richest Man in Babylon

Step 1: Start Saving Now

Spend only 9 out of each 10 dollars earned. By saving one-tenth, your bank balance will start to increase, your debts will reduce and you will build a capital base for worthwhile investments in the future. Make sure you automatically save 10% of your earnings each month. You can do this by standing order with your bank. This is like paying yourself first before you even pay all your expenses. I’ve heard it said many times that “getting rich is not about making money, it’s about keeping money”. This is a crucial first step on your journey to building wealth.

Step 2: Control Your Expenditures

Budget your expenses. No matter how much money you earn each month, make sure you have enough money to pay for your necessities – food, shelter, clothing etc. Even already rich people have a problem obeying this principle and can sometimes end up broke as a result. So, only gratify your non-essential desires if you can do so without spending more than nine-tenths of your earnings. Wealth building requires discipline and self-control. You must continue to save one-tenth of what you bring in no matter what. This is the key to building some capital which you can then use to invest.

Step 3: Make Your Saved Money Multiply

As you start to build up your savings, invest that money so that it makes more money for you. Put each dollar to work. Don’t leave your savings sitting dormant in a bank account (unless it’s a very high interest rate savings account!). Worse still, don’t leave it under your mattress depreciating in value! To build wealth it is not enough just to save money. You must put your saved money to work. Seek out investments opportunities that give you a higher return on your money than at least the rate of inflation. Now money is beginning to work for you rather than you working for money.

Step 4: Guard Your Money from Loss

Guard your money from potential loss by investing only in things where the principal is safe and where you can get at least a fair return. Seek the advice of those experienced in the profitable handling of money and be wary of following friends and relatives into so-called investment opportunities. Educate yourself and research your investments thoroughly before parting with your hard-earned money. The first rule of making money is never to lose it!

Step 5: Own Your Own Home

You should own your own home rather than renting and handing over money to a landlord. This makes sense so long as the repayments to the bank more or less match the rental you would have given the landlord. In addition, owning your own home is good for your sense of pride and potentially raising a family. So owning your own home can enrich your life on many levels.

Step 6: Ensure a Future Income

One day your current earned income will stop! Therefore, you must create wealth for your future. You should, when you are young and have the ability to earn, make preparation for a suitable income when you are older and possibly retired so that you can provide for your own needs whilst growing older and that of your family upon your passing. Contributing to a pension (or 401(k) plan) and investing in property are great long-term wealth building strategies.

Step 7: Increase Your Ability to Earn

You can increase your ability to earn by taking more interest in your work, having more concentration upon a task and more persistence in your effort. Paying debts down fast and taking care of family and friends is also essential and will increase your ability to earn money. Essentially, the wiser we become, the more we may earn. Becoming wiser and more skilful engenders a keen sense of self-respect which will ultimately cultivate greater wealth.

The Truth About Wealth Building

We all want to think we are better off at each stage of our lives. But most people don’t see this as wealth building. Considering that wealth is often equated with greed and selfishness, it’s very easy to understand why.

Think about this. Wikipedia defines wealth as a quantity of things, possessions, valuables or resources owned by someone. That’s a rather dry way to put it. But while the amount of wealth a person builds varies, it is still a natural outcome of living. This doesn’t only apply to money or appreciable assets either. We all acquire things which add to our wealth.

As such, everyone should to take steps for securing their own future and accept that wealth is an important part of that future. Life is tenuous and things that seem permanent in our lives can come apart rather quickly. A better way to see wealth, then, is building a personal estate to help secure your own future.

The core of any estate is all of the things a person owns, so we all build a personal estate during the course of our lives, and we all end with some level of wealth. That’s one reason it’s so important to know that the personal acquisitions we make in our lives will ultimately either build security into our estate or add burden into it.

It only makes sense that everyone should take a serious and personal approach to wealth building. The reasons for building wealth may vary by individual but common to all of us are:

wealth gives us a dependable safety net in life
wealth provides options and choices when making important life decisions
wealth provides time to recover from unanticipated pitfalls
wealth increases our security in the retirement years

This leads to the first basic truth for building wealth, which is to immediately begin to live below your means! As you learn to personalize the importance of wealth and your own reasons for building an estate, you must consistently use this truth as the starting point on your road map to success.

This first principle of estate building must be followed now and forever. Regardless of your current income, regardless of future changes to your income, and regardless of changes to your family status and size, living on less than you earn is required. The path called “spending less than you earn” is your personal road to estate building and is your safety net in life.

Unfortunately, living within your means isn’t accomplished without some pain. It requires tackling debt, a difficult task for many people. Controlling and eliminating debt, particularly consumer debt, is absolutely a necessary step toward living below your means. It must be done, pain or not, as nothing will tax your ability to save more than excessive debt.

Living on less than you earn has to be your cornerstone for building wealth and is the number one ingredient for ongoing wealth building. It allows you to grow a personal fund of dedicated money, which will be money set aside to be used as your primary tool for acquiring long-term assets.

There are many ways to invest dedicated money, including equities, fixed income investments, hard assets and others. All involve subsequent important principles to be learned only after the first principle is in place: spend less than you earn.

Living on less than you earn has to become a lifetime habit. Begin by saving something from every paycheck. Saving early in life is most important, but saving at any stage of life is important too.

The quickest means to spending less than you earn is to create a budget. Start with a simple budget. Basic budgeting tips and guides are abundantly found online and all help control personal spending. A popular personal finance site is Mint: Money Manager, Bill Pay, Credit Score, Budgeting… and it will help you with budgeting and eliminating debt.

Beyond just building your personal wealth, developing skills to guide your financial life is a true confidence builder and it bolsters your self-esteem. It becomes a feel good habit to have. The personal control and confidence you experience will be necessary for making wise decisions you’ll use to increase your personal wealth.

While the core reason for planning and growing your own estate should always be personal security, living on less than you earn must always remain your number one principle of wealth building. Be assured it’s a lifelong habit used by everyone who has watched their own estate increase. You can be successful experiencing your own abilities for building personal security. Your own wealth building begins today by living below your means.

The Cycle of Wealth Building

There are foundational principles that rule the cycle of wealth building whether you build your wealth on stock market, home loans, or any other type of real estate investment. Many who are new to wealth building are often not aware of, or not disciplined to follow the principles for building wealth. The formula for building wealth is straight forward 1) make more, 2) spend less, 3) start early and 4) manage the risks. The cycle of wealth building consists of phases of goal setting, planning and execution.

1) Define the goals of your wealth building both short term and long term.

Goal setting begins with the questions of where do you want to be financially 5 years from now, 20 years from now and by the time of your retirement. For instance, you plan to own a half million dollar house in 5 years. You would like to accumulate net wealth of one million dollars in 20 years. And you want secure two million dollars in your bank account when you retire. The goal of wealth building should be challenging enough yet realistic. If they are set too low, you won’t be motivated to work harder. You’ll be totally frustrated if the goals are unreachable. Studying books for personal financing and attending wealth building seminars will help you to get it right at the beginning.

2) Develop a plan that help achieve the goals you’ve set

We won’t know exactly whether the goals of the wealth building are set too low or too high unless they are justified by a plan. Many investors may think one million dollar net wealth is unthinkable. In fact, if you invest $500 a month and that invest generates 11% annual return, you’ll be a millionaire in 30 years. 11% annual return is what S&P 500 index has realized in past 30 years. To achieve your one million dollar goal, you don’t even have to make the choice between “eating well” and “sleeping well”.

3) Follow your plan and work hard

There are two common causes of failures in wealth building – 1) not committed to the plan to work hard enough, and 2) not disciplined to follow the plan and rules even they work extremely harder. Even well-known investment gurus are often distracted to believe the possibility of get-rich-quick when financial market experiences drastic up-and-down swing.

Once you’ve completed the cycle of wealth building, the next cycle of wealth building begins. Returns on investment contribute to building your wealth but not if you forget about high interest rate on debts. Taking a wealth building seminar you can discover how maintaining a realistic and positive attitude is worth more than crying about a loss.
Wealth building can begin with a raise at work or your first income after an investment.

Genuine wealth building is made up of learning which comes from a wealth building seminar or personal experience, enhanced with the input and feedback of those who are already building their own wealth. In this cycle, cash is the king so get ready for developing enough liquid resources and never invest if you are afraid to lose because you will be propitiating your luck.