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How to Build Wealth: 10 Simple Actionable Steps

Wealth represents the ability to meet one's needs and desires, both now and in the future, without significant financial constraints.

Do you dream of becoming wealthy? Are you curious about what true wealth means and how to attain it? 

In this guide, we’ll delve into the essence of wealth and the money mindset needed to achieve it. You’ll learn actionable steps to build wealth.

What is Wealth?

Wealth has many definitions. Many people describe wealth as tangible, such as monetary riches, and intangible, like a wealth of relationships.

At its core, wealth represents the ability to meet one’s needs and desires, both now and in the future, without significant financial constraints. It provides individuals the means to pursue their goals, enjoy a comfortable lifestyle, and navigate unexpected challenges with resilience.

However, it’s important to recognize that wealth is subjective and can be defined differently by each person. For some, wealth may mean having a substantial amount of money in the bank, while for others, it may involve experiencing fulfillment in their personal and professional lives.

Understanding Wealth: Calculate Your Wealth

Your net worth is the most important financial number that indicates wealth. However, it’s often overlooked in favor of credit scores.

Calculate your net worth by subtracting your liabilities from your assets:

Net Worth = Assets (what you own of value) – Liabilities (what you owe)

Positive net worth means you have enough assets to cover your liabilities and have wealth. Negative net worth means you don’t have enough assets to cover your liabilities–you lack wealth.

You can calculate your net worth every few months to see your progress towards wealth creation.

How to Build Wealth

Wealth begins with a mindset shift. Challenge limiting beliefs and embrace the idea that abundance is attainable through knowledge, planning, and action. Recognize that wealth is not solely about the numbers in your bank account but encompasses your overall well-being.

Cultivate a Wealth Mindset

Practice gratitude for what you have while striving for continuous improvement and growth. Remember that true wealth lies in living a life aligned with your values.

Focus on Assets Over Possessions

Shift your focus from accumulating possessions to acquiring appreciating assets. Instead of spending on depreciating items, prioritize investments that generate income and long-term growth. Again, calculate your net worth regularly to track your progress toward building wealth.

Prioritize Saving Over Spending

Many people are taught that the key to wealth is a high-earning career. It’s true more money gives you more opportunities to create wealth.

But you can make a million dollars, spend a million, and have no wealth. I know doctors who make $400,000 a year but are saddled with student loan debt, expensive cars, and large mortgages. When all is said and done, they are living paycheck-to-paycheck.

Let me give a more relatable example:

John makes $100,000 a year but has expenses totaling $98,000 yearly. He manages to save $2,000 of his income.

On the other hand, Maria makes $50,000 a year and saves 10% of her salary. She has $5,000 in her savings.

Who is the wealthy person in this scenario? Jane is wealthier, with $3,000 more saved than John.

This simplified example illustrates that spending has much to do with wealth creation. If you spend all the money you make, you won’t have any money left to build your savings or investments. 

I want to acknowledge that lifestyle choices, cost of living, and other variables affect how we spend our income.

My purpose is for you to understand the difference between income and wealth. Sure, income is an integral part of wealth building, but it’s not the only factor to consider.

Combat Lifestyle Inflation

Avoid the trap of lifestyle inflation by maintaining discipline in your spending habits. As your income grows, resist the temptation to increase your expenses proportionally. Instead, prioritize saving and investing to accelerate your journey towards wealth creation.

10 Simple Actionable Steps to Build Wealth

If you’ve searched online for ways to build wealth, the search results are littered with get-rich-quick schemes or “experts” marketing their riches to sell you a course. That is not the path to wealth. 

I want you to think about the following:

  • You cannot make real wealth through gimmicks
  • Understand wealth creation is affected by your mindset
  • Wealth requires knowledge, planning, and execution

And I want you to follow the steps below:

Step 1: Define Your Vision of Wealth

Before diving into the intricacies of wealth-building, take a moment to define what wealth means to you. Is it about financial stability, freedom, or fulfillment in life? Understanding your personal definition of wealth will serve as the foundation for your journey.

Step 2: Set Clear Financial Goals

Before embarking on your wealth-building journey, take some time to define your financial goals. Whether it’s saving for retirement, purchasing a home, or starting a business, having clear objectives will provide you with direction and motivation. Write down your goals, both short-term and long-term, and be specific about how much money you need to achieve them.

Step 3: Create a Budget and Stick to It

One of the fundamental principles of wealth-building is spending less than you earn. Start by tracking your expenses and identifying areas where you can cut back. Create a monthly budget that allocates a portion of your income towards savings and investments. Use tools like budgeting apps or spreadsheets to help you stay on track and monitor your progress.

Step 4: Pay Off High-Interest Debt

High-interest debt, such as credit card balances or payday loans, can hinder your ability to build wealth. Make it a priority to pay off these debts as quickly as possible. Start by tackling the debt with the highest interest rate first while making minimum payments on other debts. Once you’ve paid off a debt, redirect the money you were paying towards it to the next debt on your list.

Learn about the debt-snowball and debt-avalanche methods.

Step 5: Build an Emergency Fund

Unexpected expenses can derail your financial progress if you’re not prepared. Aim to build an emergency fund that covers at least three to six months’ worth of living expenses. Keep this money in a high-yield savings account or a liquid investment with easy access. Having an emergency fund will provide you with peace of mind and protect you from financial setbacks.

Step 6: Invest for the Future

Once you’ve paid off high-interest debt and built an emergency fund, it’s time to focus on investing for the future. Start by contributing to retirement accounts such as a 401(k) or IRA. Take advantage of employer matching contributions if available, as this is essentially free money. Consider diversifying your investments across different asset classes, such as stocks, bonds, and real estate, to minimize risk and maximize returns.

Once you’re investing for your retirement, start investing for financial independence.

Step 7: Utilize Employee Benefits

Take advantage of the benefits offered by your employer to enhance your financial well-being. Explore options such as 401(k) plans, stock purchase programs, and tuition reimbursements to supplement your income and build wealth over time.

Step 8: Diversify Your Income Streams

Relying solely on one source of income limits your potential for wealth creation. Explore opportunities to diversify your income, whether through a primary job, side hustles, or investment ventures. Multiple income streams provide stability and resilience against financial setbacks.

Step 9: Harness the Power of Leverage

Leverage your resources, including money and time, to maximize your wealth-building efforts. Understand the difference between making money and earning money through strategic investments and leveraging credit wisely. Use tools like mortgages and business loans to build equity and generate returns.

Step 10: Review and Adjust Your Plan Regularly

As you progress on your wealth-building journey, periodically review your financial plan and adjust as needed. Life circumstances and financial goals may change over time, so it’s essential to adapt your strategy accordingly. Stay flexible and be willing to modify your plan to ensure that you’re on track to achieve your long-term objectives.

Knowledge is Power: Invest in Your Financial Education

Continuously educate yourself about investment strategies, financial planning, and wealth management. Consider working with a fee-only financial planner to receive personalized guidance and accountability in achieving your wealth goals.

Jason Vitug

Jason Vitug is a bestselling author, entrepreneur, and founder of phroogal.com and thesmilelifestyle.com. His purpose to help others live their best lives through experiential and purposeful living. Jason is also a certified yoga teacher and breathwork specialist and has traveled to over 40 countries.

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