How do you define wealth? Is wealth a million dollars? Is it 50 million dollars? Or is it even a billion dollars? Is wealth only measured in money? I define wealth as having what we need in a specific area, such as finances, love, relationships, etc., and being satisfied with what we have.
Let’s focus on financial wealth, financial strength, and financial freedom.
The truth is financial wealth is a relative term. Financial wealth is about safety and being able to do what you want in life. If you create your ideal lifestyle and you need a certain amount of money to sustain it, once you get to a place in life where you do not need to earn that amount of money, then you have created significant wealth for yourself. Wealth, in absolute terms, is a construct. The exact amount of money for this will change based on you. Two different people may have two different numbers, and that’s okay. No two numbers need to be the same. What wealth means to you wholly depends on you.
Most people desire wealth. We need money to buy food, put a roof over our heads, and live our lives. Most of us work throughout our lives with financial wealth as our end goal, but without the proper understanding of creating financial wealth and a good plan, it can be hard to achieve. That brings us to the question: How do we create financial wealth in our lives? Is there some magic trick that certain individuals use, or is it just a result of hard work and resilience? Well, I believe it is a mix of both.
Here are my seven key steps to creating such financial wealth.
- Live Below Your Means
Now, living below your means does not mean living a life of nothing. It simply means forgoing certain conveniences that might be unnecessary. For example, rather than buying sliced fruits and vegetables, you can buy them and cut them at home yourself. Last week, I was buying some lettuce, and I kid you not; you get twice as much for half the price if you just buy the romaine lettuce and cut off the head yourself! Don’t pay four times or more just for a few seconds of convenience.
Wealth is created when your money is being put to work. If you consume all the money that you make and live a life equal to, or even above, your means, you will never have any money left to put to work. That’s why living below your means is so important.
- Delayed Gratification
Delayed gratification is all about resisting the urge to splurge on immediate pleasures in favor of greater rewards down the line. This might be using an older but good car for longer rather than splashing on the newly released sportscar or not buying the latest gadget if your current devices serve your purposes. By doing so, you allow your money to grow and accumulate over time, creating wealth in the long run.
Saving money doesn’t have to mean you don’t have things or even nice things. It just means being smart about how you use your resources because the overall goal you’ve established is to create financial security and wealth. As a leader in a family, or an organization, you hold the responsibility to spend your resources properly to avoid losing future opportunities and growth.
My dear friend, Joachim de Posada, highlighted this principle beautifully in his book Don’t Eat the Marshmallow!, which is based on the famous marshmallow test. This experiment showed how children who were able to delay gratification—waiting to receive a second marshmallow instead of eating the first one right away—often grew up to be more successful. Joachim’s book is a fantastic read that delves deeper into how the ability to wait is critical not only for success but also for achieving lasting financial security, and I greatly recommend it!
- Work Hard
This is perhaps the most obvious but most overlooked step in building wealth. Financial wealth is a long-term goal, and there are no shortcuts to it. If anything or anyone promises to help you build your wealth without having to put in your effort or time, AVOID THEM! Building your wealth will take your energy, efforts, time, and passion. You will need to stick to it and consistently show up to make it happen.
Work hard on your goals, save hard, and stick to a solid financial plan. Work hard to build your skills, your business, or both. Be passionate about what you do and put your all into it, and you will begin to see the returns grow exponentially. All the wonder stories of startup founders becoming millionaires practically overnight overlook the years of effort and determination it took them to get there in the first place.
- Be On The Same Page With Your Partner
Whether this is a partner in your business or your life partner in your family, you cannot build your wealth all by yourself. The decisions that you make will affect them, and the decisions that they make will affect you. To be able to make use of your resources most effectively, you need to be aligned in your financial goals, values, and strategies.
Work with your partner to build agreement and ensure that you have similar goals on how you are going to use your resources. Dedicate time to understanding both your perspectives and commit to creating a financial vision that you both believe in. And always remember, you need to work with each other and not against each other.
- Create short-term financial goals, and have long-term expectations
The one who moves a mountain begins by carrying away small stones. This Chinese proverb holds immense value in the journey of building wealth. While attaining wealth might seem like a monumental task, it’s the small, consistent actions—those seemingly minor choices and disciplined decisions—that ultimately bring you closer to your goals. Making and sticking to short-term financial goals, such as even investing $1000 every year, can lead to exponential financial returns in the long run.
For example, $1,000 invested annually at an 8% return rate will grow to over $45,000 in 50 years. If you make those $1000 deposits every year then you will have almost $620,000. (And, if you make that deposit on the last day of the year vs the first day of the year, you will have $45,000 less!) Small things make a big difference. The magic behind this is the power of compounding, which allows your savings to grow exponentially if you remain consistent. Each small contribution adds to a foundation that, over time, multiplies significantly, proving that wealth is not about one grand gesture but a series of mindful, disciplined choices made consistently.
- Eliminate Debt
Don’t incur unnecessary debt. Debt is an enemy of wealth; while savings aim to accumulate money, debt eats away at it. Every dollar owed is a step backward from achieving financial independence and wealth, as it not only reduces your savings but also puts the pressure of interest payments on you.
Try to go with a 15-year mortgage instead of a 30-year mortgage on a home, even though this might pose a greater challenge, as a way of ensuring that you’re free from debt sooner rather than later. Inherently, this will also connect back to help you live below your means and also the principle of delayed gratification.
- Maximise Tax-Benefitted and Matching Opportunities
One mistake I see many individuals make is not taking full advantage of tax-benefitted accounts and employer matching opportunities. These options are powerful tools to help you build your wealth by helping you grow your investments with minimal tax impact, giving your savings more potential to compound over time. Employee matching programs are essentially free money! Your contributions to a retirement plan will be matched by a matching contribution from your employer, and if you aren’t maximizing this opportunity, you are basically leaving money on the table that could be working for your future.
Pulling It All Together
Being mindful of your spending, maximizing savings, and investing are essential in setting up a future free from financial burdens. At the end of the day, I’m not telling you how to spend your money; you have to make the decision. What I’m sharing is that if you are creating more wealth, there are ways to do it.
Children outgrow clothes in a matter of months, why buy expensive clothes? I’m not saying they shouldn’t look nice, but you don’t have to buy branded clothes; you can buy unlabeled clothes that still look great! There are times and places when you need to buy the best, but there are times and places where this might be a waste of money.
Regardless of how much money you earn, I see professionals with salaries of hundreds of thousands of dollars a year struggle to make ends meet. And I see people who don’t make 6 figures without any debt. It’s not always about earning more money, it’s about what you do with the money you earn. There are many tools and ways to build financial wealth, and the one thing that’s required in all of them is consistent and patient effort. So be mindful, be focused, and start building your financial wealth today!
