7 Keys To Building Wealth In 2021

In today’s blog post I am going to share with you 7 important methods or keys to building wealth.

We are going to focus on wealth foundations and if you’re new to this blog then subscribe to our newsletter for information on how to achieve financial independence and wealth. 

What I am going to show you is applied by a lot of rich folks, so if you are really interested in building wealth and achieve financial independence read on. 

1. Track Everything 

If you ask the average person what percentage of their income they spent on living expenses and entertainment last month, they likely wouldn’t know you would probably get the same blank stare if you ask them how much they saved last month.

This isn’t shocking, as 61 percent of American adults, don’t employ any form of budgeting, but if you ask a rich person, they will tell you that budgeting your expenses and tracking your spending is critical to financial success. 

Many rich people use the two-step process to budget their money. 

Expected Income

First, they determine their expected income for the upcoming month. This will include their salary or business income as well as earnings through their investments.

This total figure will be the starting point when they employ the 20-30-50 budgeting method. 

Budgeting

This budgeting technique works by dividing your income in the following way.

Fifty percent is designated for living expenses like rent utilities and groceries.

The next thirty percent goes towards entertainment costs. Like going out to eat or seeing a movie, finally, twenty percent is meant to go right into your savings account. Once their budget has been established, they then diligently track their spending.

Most millionaires will connect their credit cards to apps like mint that automatically categorizes purchases into budget categories. However, it can be done the old-school way.

For instance, tracking the purchases on the notes app in their phone and manually adding the totals at the end of the month. 

Either way the rich track their money, because they know that what isn’t measured, isn’t managed! 

Now, while you may not feel like it’s as important to track your spending when you are not earning a lot of money income, the truth is that the sooner you can start building good financial habits the better.

The fact of the matter is that since you reading this I know you want to build wealth and achieve financial independence. I know you will be wealthy one day, so you better have the skills required to handle all those million about to come into your life!

2. Employ Financial Discipline In Building Wealth

If you ask any millionaire the key traits in becoming rich, they will surely mention discipline. 

This is because discipline is involved in all aspects of becoming wealthy, for instance, if you want to get a high-paying job, you have to have the discipline to get a good education which takes years of intense studying in preparation or… if you become rich through building a Business, you will have to employ discipline to work on your company, even when your friends are out partying and having fun. And once you start making big money, the discipline only becomes more important.

You see no matter how much money you make you cannot be rich if you lack the ability to save and saving takes discipline.

It means driving the car you’ve had for 10 years, rather than spending thousands of dollars on that new sports car.

It meant not watching TV all evening after work because that time could be used on that business of project or family. 

If you read any major financial book or listen to any successful entrepreneur, you will find that they consider saving money as one of the foundations of building long-term wealth.

The surprising thing is that, according to CNBC, 57% of Americans have less than $ 1,000 in their savings accounts and 39 % have no savings at all.

Now I know, saving money can be difficult, but there are a few methods that can help make it easier to put away money.

How To Save

Automated deductions

The first method is to set up automated deductions. That is setting up automated deductions from your salary on the days you are paid. 

Setting up these deductions helps you avoid spending your entire paycheck, meaning that saving money is guaranteed.

More Earning

The other way to increase your savings is to start earning more. The truth is your ability to save is restricted by how much you earn, but sadly most people’s only strategy for saving more money is cutting costs.

Now cutting cost is a great start because you can realize quick wins in the saving department, but realistically you could only reduce your monthly cost by so much. 

You will always have to pay for things like housing, food, and transportation, meaning that, if you want to take your savings to the next level, then you need to focus on the other half of the income statement, which is your earnings.

in my blog how to make a hundred dollars a day with no money? I go over some simple but effective ways to increase during come, like tutoring, freelancing or driving for Uber. 

Imagine how big of a difference earning an extra $ 100 a day would have on your savings earning an extra hundred dollars a day translates to roughly three thousand dollars a month.

Let’s say you only save 75 % of that extra income every month for a year, you would end up with 27,000 dollars in extra savings. Therefore, becoming rich is just as much about making money as it is about saving.

3. Buy What You Can Afford

Living within your means is critical to achieving financial independence.

When most people think of the millionaire lifestyle, they think of rich people, spending endless amounts of money on designer clothes and fancy cars, but in reality, millionaires are quite responsible spenders who live within their means… And one of the ways that they’ve been able to amass the wealth they have is by avoiding the income trap.

You see when most people start earning more money. They begin to spend more. For instance, your standard family car may suffice. When you’re earning $50,000 a year, but when you suddenly find yourself earning  $100,000 a year, you may gravitate towards getting a luxury vehicle instead. 

This rise in spending can be attributed to what’s known as Parkinson’s law. Parkinson’s law states that work expands so as to fill the time available for its completion.

In the financial context, It means that you will spend it up to the amount you have available, and available doesn’t just mean the money in your bank, which is why people will go broke and then some by maxing out their lines of credit and credit cards. The reason this phenomenon takes place is due to a lack of financial control. 

Unfortunately, most schools will teach things like how to find the slope of a line or how to write in cursive, but you are never taught things like how to create and maintain a budget aka real-life skills.

Therefore, unless you have family or friends who bestows sound financial principles upon you, then you are almost destined to run into money management issues later in life.

This habit of living below your means is especially important for those who run their own businesses.

This is because, as a business owner, there will be good times when you’re, making significant revenues and bad times when your business will decline. But if you spend well beyond your means, when times are good, then you will not be able to weather the storm of harsh economic times which will cause your business to go bankrupt. 

Once you master the art of living within your means, it can set you up perfectly to begin employing the next method.

4. Put Your Money To Work

For life is like a game of Monopoly. The person who owns the best properties on the board makes the most amount of money. Not only do these investments make them positive income as the game goes on, but they can be disposed of for a significant lump sum at the end of the game.

However, you can only acquire these investments with your cash, which is why the rich put your money to work through investing.

Unfortunately, when the average person gets paid, they either spend it or at best put the money in their savings account. Now putting money in a savings account is definitely better than blowing it on frivolous items, but the problem with this method is that sending money to your savings account every month will not grow your wealth.

The average savings account yields just 0.1 percent interest annually, which means that, even if you have $50,000 in savings, you would earn only 50 dollars in interest. This is why the rich make a point to put their savings to work through investing and the earlier you can start investing the better.

On average millionaires invest 20% of their household income each year, making investing a significant part of their wealth accumulation strategy. And if you think the millionaire’s, invest in exciting products, you may be surprised. Most millionaires invest in the same things as the average investor, like a Roth IRA and a 401 K, but also these investments include things like real estate properties and personal development.

5. Never Touch The Principle 

At this point, we know that the rich track their spending diligently, they employ financial discipline, live frugally, and put their money to work. But what really separates these wealthy individuals from the poor is that they never spend their principal.

While we previously said that most millionaires live frugally. Some do like to spend on luxury items, and while you would think that spending large sums of money would reduce their wealth or even make them poor, it doesn’t because they never touch the principle in financial terms.

In financial terms, the principle is the original amount of money put into an investment, for instance, if you were to buy 10,000 shares for $100,000 that paid an annual dividend of $ 2 a share.

The hundred thousand dollars you invested will be the principal and at $ 2 a share or $20,000 will be the dividend income.

In short, the rich never detract from the assets that are already earning them income. Meaning that their wealth will never decline due to their spending Rich Dad Poor Dad author Robert Kiyosaki alluded to this method of spending in a recent tweet where he said “live it up, buy everything you want, one caveat: buy the assets to pay for them”.

First Roberts been known to use his portfolio of investment properties to fund his purchases like when he goes on vacation or buys a new car. Unfortunately, most people generate their cash flow in the form of active income by trading time for money.

When you only earn active income, it means that any money you spend is directly reducing your wealth, as income earned but not invested will never grow to a point where you can spend the excess cash it produces.

So what type of investments can you use to make you passive income? 

Type of investments can you use to make you passive income

Some of my favorite passive income methods include investment properties, dividend stocks and real estate investment trusts.

Finally, C. Investment properties allow you to invest in a building with your down payment. i.e. principal. Cash flows through the profits you make from your tenants rent payments. 

A. Dividend stocks are great because they pay you quarterly or annually without you having to reduce how much money you have in the market. 

B. You can have your diversified stock portfolio right in a low fee index fund.

B. Investing In Your own company. 

C. E-Commerce or digital assets on suitable platforms

D. Real estate investment trusts. (REIT) it’s a company that owns or produces income producing real estate. It is a closed-end investment company that owns assets related to real estate such as buildings, land and real estate securities. REITs sell on the major stock market exchanges like common stock.

You can think of a REIT as a mutual fund for real estate investing and like a fund, the way you own it is through buying stocks. You see when you own stock in a REIT, you own a share of the profit which is produced by that real estate investment.

It’s, a way to invest in real estate without the hassle of being a property owner, and every time profits are shared you will receive your portion of the cash distributed and the best part is that there was no property maintenance, no dealing with tenants and no chasing rent payments required.

6.The value of compounding in building wealth

The sixth method, like to share with you, is the value of compounding. The magic and the beauty and the power of compounding is astounding in building wealth.

This is so huge when you’re thinking about purchasing something you’re comparing between two different things and one thing costs a thousand dollars less than the other thing did you know that that thousand dollars is not really a thousand dollars?

It’s really in 20 years it will be if it grows at seven percent, it will be three thousand eight hundred and seventy dollars so start thinking in terms of the future value of that money compounded if you put it aside to grow today. compounding is such a powerful tool and it requires no work.

7. There are many ways to create wealth

This final point is so so important to know that … there are many ways to create wealth and that the way to build wealth is not only by simply by investing in stocks by you know having this job with an employer and then investing that money in stocks and bonds, and making good decisions around that and saving as much investing as much as you could in the right way. 

It is crucial to discover that so much of wealth-building happens with creating small businesses, and it’s, not just about stocks and bonds, especially now, as people are needing to look at other ways to build wealth beyond just investing in the traditional way.

It is that shift in thinking from simply accumulating and saving enough and investing to realizing that you can create this other income stream(s). That will be supplementing not only your lifestyle but the amount of money that you’re, putting aside to then as an example payoff your mortgage new business ventures. 

In conclusion

If you want to continue growing your wealth while still being able to spend from time to time, you must only spend the income that your asses generate and never the principal thanks for reading, and hope it gave you value.