This is the first in a series of eight articles expanding on the steps of the article:
8 Steps to Build Wealth
Step 1: Decide to Build Wealth
In order to build wealth, this step is not only the first chronologically, but also the first in importance. Unfortunately and perhaps counter-intuitively, it’s also a very overlooked step. Plenty of people would like to be wealthy, but very few actively decide to set out on a path to build wealth. If you choose to do so, you’ll be standing out from the crowd.
Most people I’ve talked to view money as a means for gratification. These people spend much of what they make (or sometimes more than what they make), and although they may put some money away for retirement, or for a house, their primary concern is to afford the lifestyle they want in the present. This viewpoint is indeed somewhat valid. When someone works hard for money, it’s only natural that they want to enjoy the fruits of their labor. Life is in part about experiencing new things, and some of these experiences do have an economic cost.
There are some that wish to take wealth to the next step- to focus on building some real wealth that exponentially grows over the course of their lifetime. Wealth can mean abundance, freedom, success, and most importantly, the ability to shape the world in some small way as you see fit- for better or worse. Money can be used to build and to help, and also to destroy and to deny. If you develop passive income that supports your lifestyle, you are free to direct your energy and your remaining resources to what you are passionate about.
Wealthy people, by definition, are in the minority. Wealth is defined, generally, in reference to the rest of the culture that you live in. The standard of wealth in one country may be significantly different than wealth in another country. What this means is that in order to build wealth, you have to do something different than what is normal. Since the majority are not wealthy, you can’t follow the ways of the masses to attain wealth. You have to fight against needless consumption and credit card debt. You have to set aside money for growth each time you make it. You have to have a solid understanding of the basic principles of wealth building, investing, and business, and this requires constantly learning and growing.
The next seven steps are all about how to build wealth, but it begins with you deciding that building wealth is one of your goals. If it’s not, then don’t worry, and move on. If it is, then you have to choose to build wealth and to know that you will succeed. It’s not a goal you can be wishy-washy or uncertain about. You have to dedicate some time and some resources to making it happen and to remain confident in your goal. Money doesn’t find it’s way to good stock investments by itself; it requires financial prudence to produce abundance.
Why do you think people DON’T want to build wealth? That’s the fascinating question in my mind.
Is it b/c they are minimalists perhaps and don’t need much?
Thanks for your comment. It’s not that I think people don’t want to build wealth, it’s that I think they don’t actively decide to set out to build wealth.
I’m sure reasons are varied, as people are varied. I don’t think minimalism has much to do with it, as most people are not particularly minimalist, though that might be the reason for some.
My estimate is that the primary reason is that most people view their wealth as being equal to their income. They receive income, and view that as money they can spend, knowing that more is coming with the next paycheck. They’ll set some aside for retirement and consider that “paying their dues”. Most people, while they want more money, aren’t actively choosing to become wealthy (or at least wealthier). Maybe they don’t understand all the options open to them, or look at themselves as someone that is not capable of building wealth.
Really great question. I think people don’t build wealth because they don’t realize they can and don’t know how.
This argument is a little bit convoluted, but knowledge is often transmitted through social networks. For example people learn about jobs fashion, diets, etc., because one of their friends or acquaintances knows about the job, is wearing something new or following some faddish diet. Knowledge about wealth may follow the same pattern. That is, people who decide to gain wealth do it because they’ve seen someone in their social network who has gotten rich.
Kiyosaki’s Rich Dad, Poor Dad metaphore is instructive in this regard. Regardless of what you think about Kiyosaki, he may in fact have had a friend with a rich family member who was able to model effective wealth building behavior.
So, part of the answer to the question: why some people DON”T want to build wealth is that they they don’t have wealthy people in their social network so they don’t know they can.
Samurai: because it’s not easy and takes hard work. Everyone wants to go to heaven, but no one wants to die.
Great question, Samurai,
I’d argue the reason people do not begin building their path to a higher net worth is likely the same reason people don’t floss their teeth on a regular basis.
Everyone wants to have a cavity-free mouth, without gum disease, crowns and other unpleasant things, but does anyone actually take the act of flossing seriously? Most don’t and choose to floss only the night before seeing their dentist.
On the flip side, it is the individuals who truly understand the importance of flossing, as means to prevent future problems with their teeth and gums, who make the conscience choice to floss on a daily basis. These motivated people, much like people who choose to begin building wealth, are few and far between.
Congratulations to everyone reading Matt’s posts, as we are a select few who understand the importance of planning for our futures and allowing ourselves to be comfortable in the fact we will be ready for any future financial challenges.
Err… meant “conscious” instead of “conscience” and, of course, I didn’t mean to insinuate there were a “select few” who read your site, but, rather, individuals who take on the challenge to build wealth are the exception, rather than the rule.
Good post and comments!
Many of my friends (even though they havent said it out loud..) probably think im a bit weird to be saving away for some distant future years from now. It simple isnt in their mindset. I have alot lower income then most of my friends but they save less (if any). They probably feel that saving are for the oldies, when you are young you should enjoy life (I dont know the correlation between expensive clothes and happines, but it cant be high?)
Many of my friends arent happy about their housingstandards. They simply stay passive and hope for better times. I think the key is to understand that you can change your future by saving. By saving a modest 2000kr every month (about 300 usd) you can probably pay half of an apartment ,in cash, 10 years from now.
Perhaps an automatic calculator like the one on swedish placera.nu (im sure there are others) can be a good tool for understanding how monthly saving grows. In that “piggybank” you put 3 inputs:
1) Savings goal
2) Savings time (years)
3) Yearly return (%)
And within seconds it spots out your needed monthly savings.
The hard bit is to start. Once people start saving they will see how little you sacrifice and how easy it is to avoid some of the unneeded consumtion.
Great article and site! I agree that not most people are into wealth building. My husband thought I was joking when he asked me what I want for Christmas and I answered “stocks”. And I have a lot of great friends but only one person shares my enthusiasm for these things. I think building wealth is not a path many people choose.