What Are The 5 Keys To Building Wealth?
Updated: Sep 21, 2021
The 5 keys to building wealth may be simpler than you think. In fact, a few easy steps can put you on the right path to financial freedom.
Your path may be shorter or longer than others’, but the goal is to create a plan and stick to it. Building wealth is something that takes patience and time, and there is no secret to achieving a life full of prosperity.
5 Keys to Building Wealth
Does your income impact your ability to build wealth? Well, yes it certainly does. You can always save money as long as you have a steady job.
It may be a slower process with a lower income, and you may have to make a few more sacrifices, but it’s possible. For example, the five keys to building wealth are:
Evaluate your income periodically
Automate your savings efforts
Reduce your high-interest debts
Live within your means
Invest early and wisely.
Each of these keys depends on the others to succeed. Therefore, you have to create a balanced plan that addresses each of these needs. Here’s how you can do it.
Evaluate Your Income
There are two types of income: your earned income and your passive income. Earned income comes from your job, while passive income comes from your investments.
It’s important to evaluate your income at least once a year. Do you enjoy your work? How much do you make? Are there advancement opportunities? How can you get there?
Ask yourself these questions and connect the dots. You may learn that you want to pursue other options, or further your education. You may also determine that you really enjoy what you do and want to expand on your current career path.
This will help you determine your goals and what it will take to get there. Generally, there are many requirements to gaining more responsibility and earning higher pay. This can include your education, training, experience, and communication skills. Periodic income reviews will help you discover which areas you need more focus on in order to reach your goals.
Automate Your Savings Efforts
Saving money is one of the most important keys to building wealth-It’s the foundation for the entire process. Yet many people struggle to do so, and here is why…..
Spending money is very tempting. Society has "normalized" financing your lifestyle with debt, spending more than you make, and always comparing yourself to others. This leads to overspending your budget and taking on tremendous debt.
However, banking has advanced in many ways to help you become more efficient with your savings. There is no better option than automating these efforts.
Setup an automatic transfer from your checking to your savings account each month. Make sure this amount considers your income and living needs.
Save every penny you can! This alone will give you more room to take on unexpected costs, such as healthcare expenses for example.
Reduce High-Interest Debts
Not all debt is bad debt. Having a mortgage or taking on student loans is an investment that is considered to be “good debt.” But, there’s one debt that you cannot allow piling up.....
Credit cards commonly come with high interest rates that will hinder your ability to build wealth. So, it’s important to eliminate this debt as quickly as possible with the snowball method.
It looks something like this:
Step 1: List your debts from smallest to the largest regardless of interest rate. Step 2: Make minimum payments on all your debts except the smallest. Step 3: Pay as much as possible on your smallest debt. Step 4: Repeat until each debt is paid in full.
Paying down this debt is one of the most valuable keys to building wealth.
Live Within Your Means
Balance is everything in life. In wealth building, this balance comes from budgeting.
Social media paints a picture of living the life of luxury, but you should never compare yourself to others. Everyone has different financial priorities.
Make sure you stick to your priorities and be the best version of yourself, because this will pay off in the long run. Live within your means and reap the rewards later in life.
Create a budget for bills, food, travel and any other interests...and stick with it!
Invest Early and Wisely
The keys to building wealth need a little ignition to really get going. This is where your passive income comes into play. Making smart investments is the best way to build wealth quickly.
You can fast track your path to financial freedom by investing in the stock market. Learn more about the stock market and put money aside to invest once you feel comfortable.
This is an opportunity to earn a lot more money than you originally put in. Begin investing as early as you can. At the most basic levels of investing, you can make huge gains. Imagine what you can do after gaining experience in the stock market!
Your Keys to Building Wealth
You will hear me say it multiple times, and for good reason: Building wealth is a lifelong process, and it is not easy, but everyone can do it. These 5 keys to building wealth will give you a jump-start to meeting your financial goals for the future.
Read Next: 5 Key Steps to Building Wealth in Your 20s