10 Critical Wealth Building Cornerstones You Need to Become Rich
Do you want to change your finances for the better? Have you tried surefire ideas you’ve heard others talk about only to be left with disappointment and no results?
The truth is, there is no magic bullet or formula for building wealth.
This isn’t to say you can leave things up to chance.
There are tried and true wealth building cornerstones that you can use to effectively build wealth for the long term.
These wealth building cornerstones are the foundations that most every millionaire has used to get to where they are today.
While these tips won’t make you rich overnight, if you follow them through, in time you will see massive improvements in your finances and will be on track to wealth.
What Are These Wealth Building Cornerstones?
Here are the 10 keys tips you need to follow to start building wealth today.
10 Essential Wealth Building Cornerstones To Become Rich
#1. Save First
The very first wealth building cornerstone is to pay yourself first. By making sure you save something before you spend any money ensures you will improve your finances.
So how do you go about paying yourself first? You have many options, including:
- Investing in your 401k plan at work
- Automatically transferring a portion of your paycheck to a savings account
- Setting up an automatic transfer to your savings account on a set day each month
- Setting up an automatic investment with a broker
Any one of these options works to get you to pay yourself first.
And if money is tight, this isn’t an excuse to not save. Even if you can only save $5 or $10 a month, you need to do it.
At this point, you need to simply create a habit of saving money. Once the habit is in place, you can work on increasing the amount you save by following the remaining tips on this list.
#2. Know Where Your Money Is Going
In order to build wealth, you have to have an idea where your money is going. If I asked you to tell me how you spent your money last month, could you?
Chances are you could explain a handful of expenses, but not all of them.
This is where budgeting comes into play. By setting up and following a budget, you know where all of your money is going.
And this can be eye-opening.
I remember when I started budgeting, my jaw hit the floor when I saw how much money I was spending dining out.
My $10 lunches here and there weren’t things I thought about. But I started to think about them once I saw the total amount I spent at the end of the month.
From this simple exercise, I was able to reduce my dining out budget and start saving more money.
This led to me having a larger savings account balance and earning more and more interest every month.
To get started budgeting, you can use the 50/30/20 budget. It is great for beginners and easy to follow.
Alternatively, you can focus on just your variable expenses. This means not tracking your rent or loan payments since they are fixed amounts each month.
Instead focus on groceries, dining out, entertainment, etc. as these are the budget categories that tend to get us in the most trouble.
#3. Create Goals
Once you are paying yourself first and have an idea where your money is going, it is time to create goals.
What do you want out of life financially?
This isn’t something that can be done in 5 minutes. This is a process that will take some time.
I recommend you sit down and write down some ideas for what you want to do with your money, like saving for a house or a vacation, etc.
Then do other things and come back to your list in a day or two. Reread it and see if what you wrote down resonates with you.
Do they excite you or make you feel good? If so, you are on the right track.
If not, it is time to think some more.
Once you have your goals, don’t just leave them as is.
Rewrite them as a story so they have a meaning. For example, don’t just say you want to retire at 60. Say you want to retire at 60 so you can work on your garden and travel to see the important landmarks of this country.
By getting specific, you will be motivated to see your goal through.
Finally, don’t put your goals in a drawer. Leave them somewhere that you will see them so you can be reminded to keep working to achieve them.
#4. Know Where Your Values Lie
This wealth building cornerstone is related to creating goals. Many of us fall into the trap of buying things to impress others.
We think that when we have nice things, we will be happy since we are showing off our success.
The truth is, most of these things have no value or meaning to you. As a result, you keep buying more and more stuff just to feel happy.
You need to stop this and figure out where your values lie. Once you do this, you will stop spending money on dumb things and start spending money on things that matter to you.
For example, I used to buy designer clothes. I thought that buying expensive clothing impressed others and made me feel good.
But the reality was it didn’t. No one cared what the tag on my shirt said. And I felt the same wearing a $100 dress shirt or a $20 dress shirt.
I ended up figuring out what really mattered to me. When I did this, I stopped needless spending. I found my happiness increased and I was spending a lot less money.
This allowed me to spend more money on the things I truly loved and I still had extra money left over to save.
For this to work, follow the same process as above. Write down what you think matters to you, then come back to your list and see how you feel.
#5. Begin Paying off Debt
If you are always in debt, you are never going to build wealth. It’s as simple as that.
There is no one I know that became rich by always having to pay others.
So make a plan to finally get out of debt. You can use any method that works for you, but the popular one that many people recommend is the debt snowball.
This has you organize your debt from smallest balance to largest. Then you pay the minimum each month on all the debt except the smallest.
You take all the money you can afford and put it towards the smallest debt. When that is gone, you focus on the next smallest debt, and so on.
It works by keeping you motivated over the long term to pay off your debt.
I encourage you to work hard to rid yourself of credit card debt, auto loans, and student loan debt as fast as possible.
The more debt you pay off, the more money you free up every month to save and invest.
#6. Focus on Your Career
Your career and you specifically are your greatest asset. Nothing you invest in will ever match the income you earn over your lifetime from your career.
So you have to start treating it as your greatest asset.
Don’t just show up to work every day and go through the motions. Figure out how to earn larger raises and bonuses.
The money is out there, you just have to figure out how to get it.
A great first step is to talk to your manager. Ask them what you need to do in order to earn a higher salary.
In addition to talking to your manager, you should be actively doing the following:
- Figuring out ways to work smarter. This means learning about programs or other ways to do the things you do now in a more productive manner.
- See if you can save the company money. Is there something that the company does that is wasteful? Or is there a way to make a process more efficient?
- Find projects and other work. Step outside your job duties and find new projects you can work on or see if other co-workers need work taken off their plate.
While most of these things require you to do more, if you can find ways to work smarter and more efficiently, you can get more done in the same or a little more time than you are working now.
Think about it this way. Look at how much time you spend in a week surfing the internet or getting lost in conversation at the water cooler.
If you can reduce time spent here along with a few others, you will get a lot more done and still not have to stay late.
#7. Start Investing
Investing is a critical piece of the wealth building cornerstones. While your career is your greatest income producing asset, investing your money is second.
And the good news is that investing isn’t complicated. Well, it can be if you choose to make it so.
But you can easily get by with a simple index based mutual fund portfolio, set up a monthly investment and you are done.
Of course, if you are interested in a different type of investing, like day trading, you can do that too.
The key is that you simply start investing. Don’t make the mistake of thinking that keeping all of your money in a savings account is going to allow you to reach your goals.
The reality is the money in your savings account isn’t going to grow at a rate to help you reach your goals. You need a greater rate of return than what savings account provide.
#8. Find Extra Sources of Income
In addition to getting the most out of your career, you want to look into ways to make a little extra on the side.
Why do I recommend this?
It only pads your bottom line.
When I make extra money, I never budget for it. It all goes right into savings. And adding a couple thousand dollars into my investment account every year has paid off nicely.
Don’t think you need to work a second job to bring in more income. You can do simple things like declutter your house, take online surveys, sell your services on Fiverr, become a freelancer, and more.
When you find something you love to do, it won’t feel like work and you will look forward to doing it.
Today, I work a few extra hours a week and still earn free gift cards that I use to keep my grocery budget in check.
Take a few minutes and think about what you enjoy doing and see if there is a way you can earn a little extra money from it.
#9. Never Stop Learning
Even after you begin to use the tips listed above, it is important that you never stop learning. New products come out all the time to help you with your money.
New tax laws are passed every year that could have an impact on your wealth. While you don’t need to become an expert when it comes to personal finance, it is important that you stay on top of things.
For example, I enjoy reading other personal finance blogs. Many times, the stories of how the author handles money doesn’t apply to me.
But there have been times the article has gotten me to think differently about my money.
Read magazines or blogs. Watch the news. By continuing to learn about personal finance, you increase the likelihood that you can keep growing and maintaining your wealth.
#10. Change and Adapt
The last of the wealth building cornerstones is to change and adapt. Life happens. Goals and dreams change.
As a result, you need to be flexible with your plans for building wealth.
You might think you want to retire early now, only to land a dream job that gives you meaning and purpose. As a result, early retirement is no longer a goal.
Or maybe you had a goal of having $5 million in the bank, but now realize you can live happily on much less.
By changing and adapting with the times, you ensure happiness in life.
Be certain to review your goals and values every few years to make sure they still fit with your life. If they don’t be sure to revise your plans.
Final Thoughts about Wealth Building Cornerstones
At the end of the day, you can build wealth and live the life of your dreams. You just have to give up on the idea that there is a magic bullet that will make you wealthy overnight.
The real path to wealth is building a solid foundation and you do that by following the wealth building cornerstones I outlined above.
If you can follow these tips, in time you will see the results of your effort and will be building long term wealth that lasts generations.
Author Bio: Jon Dulin writes at Compounding Pennies, a personal finance blog whose goal is to help people be better with their money, one day at a time. By making small changes with your money, over time you will see massive change.