Too many people are never educated about money and how it works. Sadly, many people think that wealth is achieved through inheritance, support of a rich family, luck, greed, or fraud. The school systems around the world train employees not entrepreneurs. Starting your own business, investing, and pursuing financial freedom is seen by most as risky gambling. While going to college and working a job for 40 years is thought of as safe.
The common understanding of finance for most people is:
Money = Time spent working at a job
The majority of people think that you must work hard for a safe paycheck and build up a retirement account over decades. Few stop to think about where jobs and products come from or who creates them. The makers, builders, capitalists, investors, and entrepreneurs are the ones that grow wealthy from providing the goods, services, and technology everyone else uses.
The biggest single step you can take toward wealth is disconnecting your time from money. Finding ways to make money through leverage is the key to wealth.
The way the wealthy see finance:
Created value = Money
You are rewarded in the marketplace for what you provide to it. Whether it’s your work through a job or services you provide through a business, that’s where money comes from. Millionaires are created by creating millions of dollars in value in the marketplace. Most billionaires create their wealth by building businesses worth billions of dollars.
How do you build wealth when you have nothing?
According to one study, 68% of the ultra-wealthy with a net worth of $30 million or more are self-made, meaning they did not start out wealthy but created their wealth their self from nothing.[1] Also, 88% of all millionaires are self-made according to research.[2] This shows that wealth can be created and if one person can do it, anyone can build monetary value to their level of effort, creativity, and ability. Everyone starts out at different levels of support systems but there are many people that started from zero and poverty and went on to be wealthy.
Where you start in life financially is not your destiny for where you end up. Your financial destiny is determined by your actions. Wealth comes from the human mind, the books you read, the markets you study, the people you team up with, the businesses you model, the smart risks you take, along with your perseverance and consistency in action determines the wealth you create.
Markets pay for products and services based on their perceived value. This is why professional athletes are paid more than accountants. A stadium packed with fans are paying more to watch a sporting event than a business will pay an accountant to balance their books. The athletes are paid for their rare level of skills through the leverage of their fan base while the accountant is paid for their time and knowledge.
The same thing happens for business owners, they are paid by leveraging the abilities of their employees to provide for their customers needs. A business owner also owns the business itself so they have the rights to the full value it’s worth and the also the cash flow it creates.
If you want to build wealth you must build something of value whether it’s a business, stock portfolio, stock trading system, real estate portfolio, software, website, or intellectual property. Start where you are at and begin building. It’s okay to start small at any level and scale over time. That’s how everything starts. You will not know how to get to your goal when you start, it will be a learning experience as you go.
What are the 3 laws of building wealth?
Solve an existing problem in the world.
People pay for their problems to be solved. If a customer is hungry they will pay for food. If they are bored they will pay for entertainment. If something doesn’t work they will pay for it to be fixed. The bigger the problem you can solve for the most people, the more you will be paid.
If you look at all the biggest companies their success came because they solved a problem in their industry. Google made the problem of searching the internet easy. Apple put a super computer in everyone’s pocket solving endless problems of communication. Amazon made retail shopping from home easy, solving the need to go to stores. You don’t have to build the next big cap company, just solve a problem that you see. You will be paid in proportion for the quality of the solution and your ability to scale it.
Free your income from being time bound.
You will never build huge wealth if your income is tied to your time. You must separate you ability to make money from the time you spend working. Wealthy people don’t sell their time to an employer for money. Wealthy people buy other people’s time for their own business to create leverage for their ideas. Wealthy people spend their time building value in their business and cash flowing assets they own, they work for growing equity value not a paycheck.
Scale your idea.
Once you have a solution to a problem then scale your effort. Software can be scaled infinitely and sold over and over with no increased effort or time, this is why Microsoft was one of the most successful companies of all time. Royalties for a book can make you money while you sleep as all effort is up front on its creation. Knowledge for solving a problem can be scaled through an eCourse or YouTube video. The greatest way of all to scale is in creating a business where your employees solve your customers problems. Your business model is the solution.
What is the fastest way to build wealth?
The fastest way to build wealth is to create a business you have majority ownership in. Your net worth will be correlated with the value of the share of the business you own. If you sell a 10% stake in your business for $112,000 and still own 90% of it then you are a millionaire in net worth. You also have control of the cash flow for the business you have built and own. So your business has both value and creates cash flow if it’s profitable.