5 Tips for Building Your Wealth From Scratch
October 21, 2022 12:42 PM EST | 7 min read
What is wealth, and how do we build wealth?
Every person I ask this question to gives me a different answer.
To most, it is a magic number such as $1 million.
To some, it is financial freedom – being able to do any and everything they want to do without any financial issues.
And to some, wealth is simply having a couple of thousand in the bank.
When I started my wealth and financial freedom journey back in 1998, I felt wealthier once I had my starter emergency fund.
And as I conquered each financial obstacle, I began to feel wealthier and wealthier.
I didn’t have the numbers to make me wealthy in the eyes of society, but I did have a wealthy mindset.
Building wealth is a mindset
I actually believe that wealth is a state of mind and that rich is a number.
Riches can come and go, but wealth is a solid foundation.
Sam Walton was one of the wealthiest men in America.
He had the money, but it could have disappeared at any time.
However, he also had the mind of a wealthy person.
Even after becoming a billionaire – yes, that is with a “b” – he still drove his same used pickup truck and lived in his same house.
Your definition may vary from mine or from your neighbors, and that’s okay.
Whatever your definition is, the steps for building wealth are the same.
They are based on solid financial principles that are common to all wealthy people.
For more inspiration, don’t forget to also read our collection of motivational diamond quotes that will challenge you to work towards a path of success and riches.
The Top Five
1. Get out of debt
Wealth is defined as having an abundance of material possessions or money.
Webster and I will have to agree to disagree on this one.
Material possessions do not make you wealthy.
You are not wealthy because you:
- drive a certain car
- live in a certain neighborhood
- shop in certain stores
Most of these things can prevent you from achieving wealth and financial freedom.
In my research, I have found that most people who look like they are wealthy really aren’t.
This is because they have used debt to maintain their lifestyle.
The best way to get a clear grip on your financial picture is to determine your net worth.
This is all your assets (home, cash, retirement, etc.) minus all your liabilities (everything you owe).
This is your actual wealth.
When they do this formula, most people end up in the red.
This is because they have mortgaged their future to support their current lifestyle.
The first, most vital step to building wealth is to get out of debt.
No wealthy person has ever been interviewed and said that they are wealthy because of their debt.
When you owe other people, you don’t have the money to invest, which is the best way to build wealth.
Debt is just a huge burden that brings you down.
Release the burden, develop a plan, be aggressive and get out of debt.
It will take time – it took me 10 years – but it is so worth it.
Check out these Dave Ramsey quotes on debt.
2. Spend less than you make
This is simple math.
If you make $60,000 and you spend $65,000, you are short $5,000, which can compound into larger amounts as the years go by.
Now, say you make $60,000 and spend $55,000; you have $5,000, which can turn into much more if saved and invested correctly – compounded positively.
If you spend every dollar you make, you don’t have anything left over for a rainy day or to sock away for your future – that time when you will no longer bring in a steady cash flow.
The only way to have money is to set aside some of your income for another day – when it may rain, when you can’t work, or don’t want to work anymore.
Make it a priority to keep your expenses at less than 80% of your income.
This is a good sweet spot for wealth building.
3. The Dreaded “B” Word
Even millionaires budget.
They may not write it out anymore, but I guarantee you wealthy people have limits in every category of their spending, even if it is all in their heads.
This is the best way to ensure you stay below the 80% number we discussed.
If you just spend your money willy-nilly, you won’t have any clue where it is going and inevitably will come up short most of the time.
With a simple budget, you can know where every dollar is going and can keep yourself within the parameters of wealth building.
You can even use a budget app to help you get going!
4. Use The System
Investing is the key to wealth building once you set money aside.
Investing simply helps your money make money.
I am not a financial advisor, so I don’t have any secrets to give you on how to make a quick million.
But I know that with compound interest, your money makes money, and more money, and so on.
Did you know that if you invest $100 a month from age 25-65 in a good growth stock mutual fund, you will have at least $1.7 million based on the average return rate of 10-12% over the last 30 years?
I didn’t know this and ended up behind the eight-ball.
I took what I learned, got out of debt, learned to live on less, budgeted, and squeezed extra out to invest so that my money could make money even while I was sleeping.
Long term, almost anything can make money – good investments, real estate, bonds, etc.
Stop looking for the quick answer and start using the system.
5. Set Goals
No athlete reaches greatness without discipline and goals.
You can use these same tools to reach greatness in the area of your money.
Without goals, we can’t see the reason behind doing steps 1-4.
Goals give us a purpose.
Goals help us reach our dreams.
When we have goals, we have something to aim for.
Dream your dreams – then set the goals that you need to set to reach those dreams.
My husband and I have a dream of owning a lake house.
Years ago, we set financial goals based on that dream.
Today, we are on track to reach that goal by retirement as planned.
Make sure that your goals are written, realistic, adjustable, and specific.
All four of these are vital for success in the area of goal setting.
Start with the end – in our case, the lake house – and work your way back, setting goals all along the way.
Start building wealth today
We all want to be wealthy.
And we all have the ability to be wealthy.
But whether we reach wealth and financial freedom is all up to us.
Building wealth isn’t based on our circumstances, our past, where we were born, our parents, or any other environmental factor.
Building wealth is based on our decisions and our belief that we can.
We all can.
Many may choose to live in the present and not in the future.
Many may choose to live in the past and not in the present.
But we all can have wealth if we make the right decisions and lay out a plan to do so.
No one reaches wealth and keeps it overnight.
Yes, a few win the lottery, but even they will be broke within a few years if they don’t have a wealthy mindset.
Don’t think for one minute that you can’t be wealthy because your mom was on welfare.
Don’t think for one minute that because you are only making $20,000 a year, you can’t be wealthy.
You can start today to make decisions, goals, and choices that will bring you to a life of wealth and financial freedom.
Have any other helpful advice on building wealth?
Share your thoughts in the comment section below, and be sure to share this article with your friends on social media.
October 30, 2019 at 9:24 AM
my mind has changed i now have the courage and strength that i gone make it soon. thanks for the tips
June 12, 2019 at 11:50 AM
This is straightforward, it is on point. It is friendlier to use.
Debbie, thank you for this piece.