Building wealth – it's a topic that sparks heated debate, promotes quirky "get rich quick" schemes and drives people to pursue transactions they might otherwise never consider. "Three Simple Steps to Building Wealth" may seem like a misleading title, but it isn't. While these steps are simple to understand, they're not easy to follow.
The Steps
Basically, building wealth boils down to this: To accumulate wealth over time, you need to do three things:
• You need to make it.
This means that before you can begin to save or invest, you need to have a long-term source of income that's sufficient to have some left over after you've covered your necessities.
• You need to save it.
Once you have an income that's enough to cover your basics, you need to develop a proactive savings plan.
• You need to invest it. Once you've set aside a monthly savings goal, you need to invest it prudently.
Mathematically
This makes a simple equation: Income - Spending = Savings
Short Explanations
Step 1: Making Enough Money
This step may seem elementary, but for those who are just starting out, or are in transition, this is the most fundamental step. Most of us have seen tables showing that a small amount regularly saved and compounded over time can eventually add up to substantial wealth. But those tables never cover the other sides of the story – that is, are you making enough to save in the first place? Keep in mind that there's only so much you can cut in costs. If your costs are already cut down to the bone, you should look into ways to increase your income. Also, are you good enough at what you do and do you enjoy it enough that you can do it for 40 or 50 years in order to save that money?
There are two types of income – earned and passive. Earned income comes from what you "do for a living," while passive income is derived from investments. This section deals with earned income.
Those beginning their careers or in the midst of a career change can think about the following four considerations to decide how to derive their "earned income":
•Consider what you enjoy. You will perform better and be more likely to succeed financially doing something you enjoy.
•Consider what you're good at. Look at what you do well and how you can use those talents to earn a living.
•Consider what will pay well. Look at careers using what you enjoy and do well that will meet your financial expectations.
•Consider how to get there. Determine the education requirements, etc., needed to pursue your options
Taking these considerations into account will put you on the right path. The key is to be open-minded and proactive. You should also evaluate your income situation annually.
** STAY TUNED FOR SECOND AND THIRD STEPS LATER TODAY** Have a great day steemitians
Source: From Investopedia
