Why are you trying to build wealth?
Is it to show off? Is it so you can buy a “baller” house? Or maybe because you want to beat your friends in the game of capitalism?
I’m a huge advocate of understanding the “why” for whatever it is you’re doing. By having a strong grasp on this, you will increase your chances of success.
In a society driven by consumerism, it can be tough to stay the course.
So, why should you be focused on building wealth?
THE “WHY” OF BUILDING WEALTH
Part of me wants to hedge and say, “Everyone’s reason for building wealth might be different.” But what I’m really thinking is that everyone needs to stop focusing on building wealth and focus on what that wealth symbolizes: FREEDOM!
Having wealth doesn’t just provide you with money to buy stuff; it provides you with freedom and control over your life.
In my previous article titled, “How Lifestyle Creep Can Ruin Your Future”, I discussed how we tend to spend more when we earn more money. Fighting this urge can help you build wealth. But in that article, we didn’t get into the benefit of the importance of building wealth in the first place.
BREAKING OUT OF THE RAT RACE
In Robert Kiyosaki’s popular book, “Rich Dad, Poor Dad”, he discusses the need to break out of the “rat race.”
The “rat race” is basically another way to articulate “lifestyle creep.” People work hard to earn money and spend it. Then they work hard to get a promotion so they can earn more money and spend more money on bigger and fancier things. But during this cycle, they are stuck going around and around, just one shock away (layoffs at work?) from being in a terrible position.
Building wealth is about being able to break free of the “Rat Race” and building financial freedom, giving you true control over your life.
You might be thinking, “But Jared, I do have control over my life. I can make my own decisions on what I spend my money on!”
This is true, but in a capitalistic society that runs on money, it’s pretty rare that you can get by without actually having any money to begin with.
Anything you want to do requires money. In order to acquire money, we must work.
Well, at least until you build wealth!
Once you’ve built up wealth, especially through sources of residual income (passive income is the way to go!), then you begin to cut the cord from the necessity of having a job.
WEALTH-BUILDING IN ACTION
A personal example of how I’m building wealth is through Real Estate.
My brother and I own several rental properties. It’s not replacing our incomes yet, but we’re building it up.
Right now, our properties are providing us a yearly income in the range of $20,000 – $30,000 after expenses. (It’s a range because expenses are variable and might change. Hey, stuff breaks and needs to be fixed.)
As we make more and more money off our properties, we will then use that money to buy more properties, which will increase our annual profits. As we continue the wealth-building cycle, soon our annual income from our Real Estate will grow to $40k, and then $50k, and then $100k, and on and on.
It can go on forever if you want to continue to reinvest profits.
As you can see, this cycle is MUCH different (and much better) than the cycle of “Lifestyle Creep.”
But this cycle won’t begin unless you decide to save money to eventually invest in something like Real Estate.
HOW I ANSWERED THE KNOCK OF OPPORTUNITY
In the past year, I left my former employer, started two businesses, purchased several rental properties, and invested in a fourth business.
During the majority of my 20s, if I hadn’t focused on saving money, I wouldn’t have had the option of leaving my former employer.
If I didn’t have a big chunk of change in the bank, I wouldn’t have been able to invest in a startup with friends.
And if I was still living paycheck-to-paycheck, I never would have been able to buy multiple rental properties, helping me start the cycle of building wealth.
HOW YOU CAN BEGIN THE WEALTH-BUILDING CYCLE
Many opportunities have been missed because people didn’t have the money to take advantage of them when they presented themselves.
As the saying goes, “When opportunity knocks, answer the door!”
Just make sure that when you answer the door you aren’t empty-handed, lacking the ability to take action.
The most important thing you can do in order to begin the wealth-building cycle is to live within your means and to save your money.
Most people aren’t willing to do this, and this is precisely why the majority of Americans never build up true wealth and get themselves out of the “rat race.”
If you are thinking to yourself, “how can I do this?”, take a look at my previous article. In the article, I detailed the specific steps to take to help you save more money.
In next week’s post, I’ll walk you through the steps you need to take in order to find your “Financial Freedom Number.” When you have this figured out, you’ll know exactly what you need to achieve in order to quit your job and have true control over your life.
About the Author
Capable Wealth is a fee-only financial planning and life coaching company dedicated to helping young physicians and dentists live their ideal lives by providing clarity and empowering them to make great money decisions.
Capable Wealth helps professionals in the early stages of their careers bridge the gap between their current life and their dream life by creating a plan to implement smart money habits.
We are here to walk with you on your journey as you grow your wealth, and discover what you are truly capable of.