The other day, someone asked me how I would build wealth from nothing.
I’m not going to lie – the idea of having to start over from scratch – not a dollar in my checking account, no investments, nothing except my monthly paycheck – is a scary thought.
Wealth-building is a long-term process – and for me, it hasn’t always been a smooth one. But I’ve learned a lot about building wealth – what to do and what not to do.
Today, I’m talking about if I had to start building wealth from nothing all over again. These are the steps I would take – and what I would do differently the second time around.
1) Set Clear Financial Goals
The first thing I would do is define my short-term and long-term financial goals.
Setting intentional financial goals is key to achieving success. It gives you something to aim for and helps you stay motivated and focused. Plus, that way, you can prioritize what you need to focus on.
Having a clear vision of what you want to achieve will help you stay motivated and focused.
2) Save and Live Below My Means
To accumulate wealth, you need to save money consistently. It sounds basic, but there’s no way to build wealth if you have more money coming out of your account than you have coming in.
Set some time aside to sit down and review your bank and credit card statements. (I know – if you aren’t in the habit of doing that, it can be really intimidating. Pour yourself a glass of wine, light some candles, put on some music – do whatever you need to create a calming atmosphere. You’ll be fine.)
Make sure that you’re aware of how much money is going into your account and where you’re spending it. That awareness is key to making smart financial decisions.
3) Create a Budget
Next, I would develop a budget that outlines my income and expenses.
Personally, I’m a fan of the 50/30/20 budget, which is a simpler approach to budgeting. Basically, you spend 50% of your monthly income on necessities, like groceries and housing, 30% on wants, like a night out or a Hulu subscription, and you save 20%. You can put that 20% into a checking or high-yield savings account, where it can accumulate interest. Then, after a while, you can start investing that money. But I’ll get into that in a minute.
Creating a budget will help you organically make better financial decisions and potentially identify areas where you can cut costs.
4) Automate My Finances
Set up automatic transfers to your savings and investment accounts. This ensures that you consistently save and invest without even the temptation to spend since the money goes straight into your savings account.
5) Increase My Income
This is a situation I’ve been in before. As I was building up my first business, I needed to bring in some extra money, so I joined the gig economy. I started driving for Lyft. This helped me generate the income I needed to get my business off the ground.
If you want to speed up your wealth building, then look for opportunities to boost your income, such as side gigs, part-time jobs, or skill development. A higher income can lead to more savings and investments and can help speed up your wealth-building journey.
6) Pay Off High-Interest Debt
We define high-interest debt as any debt with an interest rate above 7%, such as credit card debt. This debt can erode your wealth-building efforts.
In this imaginary scenario, I don’t necessarily have debt, but if I did, I would prioritize paying off these debts to reduce interest payments and free up more money for savings and investments.
7) Build an Emergency Fund
An emergency fund is a financial safety net. It’s there for when life’s unexpected – and often unpleasant – events pop up. Like, your dog gets sick and you have to pay the vet bill. Or you pop a tire and have to buy a new one.
Having a well-stocked emergency fund allows you to cover those expenses without jeopardizing your financial security.
If you don’t have an emergency fund at all, prioritize building up $1,000. Over time, aim to have 3-6 months' worth of living expenses in a readily accessible account so you can be financially prepared for anything.
8) Save for Retirement
I know it can be easy to put off retirement savings. When you’re young, it seems far away, and when you’re older, other things seem more pressing.
But you need to take care of your future self. Your retirement savings need time to grow. In fact, starting early will help you get ahead faster than putting a lot of money into your retirement accounts later in life.
9) Invest Wisely
Investing is extremely important for wealth building. When you start investing, you stop trading time for money. Meaning, your money is growing without you having to constantly work for it.
But, if I were starting to invest for the first time, I would put some money into ETFs. ETFs are a great investment option because they’re bundles of different stocks, so they have high return but lower risk than simply buying a single stock.
Over time, I would focus on diversifying my investments to maximize returns and minimize risk. If you’re interested in learning how to build a well-diversified portfolio, we have a full video on that, which I’ll link in the description.
10) Avoid Get-Rich-Quick Schemes
Be cautious of any opportunities that promise quick and easy wealth. Building wealth is a gradual process that requires discipline and patience.
Unfortunately, this isn’t something that I did well the first time around. I invested in a business that offered a big return and I ended up losing $15,000.
Instead of jumping on opportunities that seem too good to be true (and probably are), do your research. Educate yourself on investment opportunities and pick ones that align with your goals.
11) Build Multiple Income Streams
In addition to your primary source of income, consider creating multiple income streams, such as rental income, dividends, or a side business.
Developing multiple income streams is important not only because it accelerates your wealth-building, but also because it provides stability.
Whatever you put your money in – stocks, real estate, a business – will have ups and downs. By spreading your money around, you’re hedging your bets. Even if some of your income streams are struggling, you’ll hopefully have others that are performing well.
12) Continuously Monitor and Adjust
Like I said, wealth-building is a lifelong process. As you achieve different milestones and move through different stages of life, regularly review your financial goals and progress. Adjust your strategies as needed to stay on track.
Ready to Build Wealth from Nothing?
Above all, as I was going through the process, I would remind myself to be patient, be kind to myself, and that my net wealth doesn’t determine my value.
Remember that building wealth is a long-term journey. Stay focused on your goals, be disciplined in your financial habits, and be prepared to adapt to changing circumstances. Over time, your efforts and investments should help you steadily increase your wealth.
If you want to hear more about my actual wealth-building journey and how I went from $40,000 in debt to building an investment portfolio worth over $1 million using our wealth-building system, you should check out our free Master Your Money class!
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