Building wealth is not an easy task. It is something that often takes years to build. There is a difference between being wealthy and being rich. I think I remember Chris Rock putting it best.
[jbox color="blue" title="Chris Rock says" icon="http://i62.photobucket.com/albums/h98/Tishtgirl/Blog%20Stuff/chrisrock.jpg" border="5" radius="35" shadow="9"]
Shaq is rich.
The white man who signs his check … is wealthy. “Ah, here you go, Shaq. Go buy yourself a bouncing car. Bling, bling!”[/jbox]
I remember laughing when I first heard that joke. Then I started to think about the difference. Rich is generating active income. I know several people who I thought were rich, but once the recession hit and they lost their ability to generate income, they quickly became not so rich. Someone who is wealthy generates passive income. Their income is not dependent on business cycles or a booming economy. They earn from compounding interest, intellectual property, businesses and leverage.
How to Gain Wealth
I started learning how to gain wealth so that I could leave my children the freedom of choice. I want them to be free to go to whatever college they want and not be restricted by the costs. I learned that there are four major avenues to building wealth. And they are similar to what Joe talks about over at Smart Money Focus. You should check out his thoughts on his 5 simple ways to financial independence.
Ways to Save Money
The first method to building wealth is saving money. I don’t mean save a little here and there, I mean really putting away at least ten percent of your income. Then don’t just stick it under your mattress or in a barely earning interest CD. The best way to save money is to make it automatic. Set up an automatic transfer from your checking account each month or biweekly then get ready to spend. Save by sharing one car, for example. Little bits add up quickly.
Learn to Invest Money
I like to look at investing as spending because it makes it more fun for me. I like to buy pieces of companies each month. Start with basic investing knowledge that you will find here and at other personal finance blogs. Read the information that you’ll find at reputable news sources and stay up to date with what is going on in the investing world.
Learn to Budget Your Money
It has often been said that it’s not how much you make, it’s how much you keep. Budgeting is the difference that sets apart the winners and the losers. I’ve had the benefit of speaking with a wealthy business owner who put everything in perspective for me. I often saw him buying nice things and he even has a beautiful home in Beverly Hills. When I asked him his opinion about extravagant spending, he mentioned percentages. Here’s a simple example of what he told me. If you make 1000 dollars, then spending 500 dollars on shoes is ridiculous. However, if you make 1 million dollars, spending 500 dollars on shoes is not so bad. It’s the difference in percentage that counts.
Make More Money
So what if you are having a hard time getting started? You know what to do, but you just don’t have the cash to do it? There are a few ways that you can make more money. If you don’t have much to start, you can start a blog for free. If you don’t have much to start, you can start a blog for free. It’s all about knowing where to find cash advances to get started on your way to building wealth.Start writing about something people want to read about and soon you will be able to make money online with advertisements and such. You can also learn how to write a business plan and start your own company. You can find investors that are willing to benefit from your idea and labor and invest cash to get you started. You can also maximize your career by getting a more profitable degree and generating cash so that you can save, budget and invest.
As a young adult, you have the benefit of time on your side. Get a head start by saving money now and learning to invest what you have. With time, you will begin to build a sturdy foundation for wealth that can be passed down from generation to generation.
I agree that young people should be saving/investing but 10% is not enough. That was enough, for men, when you included social security. Even back when the experts recommended 10%, many recommended 12.5-15% for women because women live longer. Now that our generation probably cannot rely on social security I think we should be save at least 20% for retirement and about 10% post tax for emergencies/moves/ extra investments. I am sure most young people cannot afford that right now, but I think it is the goal to work towards.
Have you heard of the Saved Quarter Challenge? Penny actually suggests saving 25% of your income. I think it’s definitely doable especially if you budget what you have now and save any raise or extra income that may come your way.
Great tips on building wealth. Time is on your side. Way to get a jump on everyone else. Funny Shaq joke. Chris Rock rocks!
Thanks Buck!
saving money is important as every money saved is like earning money.
The biggest mistake every young adult do is they do not invest and diversify their portfolio. so the external factor like inflation in such scenario will reduce your wealth.
so stop just stacking money in your saving account, and start investing (if needed with proper advice).
That is so true! I see putting money in a savings account as similar to sticking it under the mattress. What a waste of time!
You are absolutely right that being rich and wealthy are not the same. Like my man Andre 3000 said “wealth is the word, rich is round the corner from the curb.”
Being able to generate wealth passively and regardless of outside influences is vital to achieving and maintaining financial independence.
I like that quote!
Young adults are the group both most in need of this advice, and most likely to benefit, since as you say, time is indeed on their side.
Good stuff here, La Tisha. I of course agree with saving and investing, but I also like how you noted making money.
While I do think that people can do well by living within their means even on an average income, let’s not forget that in order to save money one must actually make it! Thus, making more money can only help.
As for Shaq, he’s become an NBA mercenary at this point, collecting big bucks at each new stop! I recall hearing years ago early in his career that Shaq lived off endorsements and banked his whole salary (or maybe vice versa). Anyway, he seemed to have a good sense of keeping money. Also heard a story of how he gave someone a $20 tip on a $30 dinner bill, so there’s some generosity there two. Heard these things second hand, so take it in that spirit
Thanks! Yeah I think when Chris Rock made that joke Shaq wasn’t such a huge star. I know so many people who have thoughts of becoming wealthy but they can’t seem to get started. So figuring out how to make money is a big deal.
You and I have some of the same wealth drivers! I have a greater focus on building wealth too now that I have to worry about college costs for my kids.
I’m socking money away into a 529 plan, and really really really hoping for some scholarships!!!
That’s something I’m already thinking about even though I don’t have kids yet. I just know that I wanted to go to an out of state school but couldn’t afford it. I want my kids to be able to choose where ever they want to go.
Hi Latisha, I have to differ a bit as I think Shaq is wealthy too
But I get the joke. You want to be in control of your own financial future. Your headings were very informative.
Thanks, yeah I’d say by now Shaq is definitely not in need.
Ah Chris Rock! I’m a die hard fan! I remember that one – was it ‘Bigger and Blacker’ or ‘Bring the Pain’? I’m sure it was one of those two!
“As a young adult, you have the benefit of time on your side.” So true! Power of compounding works magic!
I think it was Bigger and Blacker, one of his best for sure