How Does One Become Wealthy?

Perhaps you have asked yourself how someone becomes wealthy. How do I become wealthy? The best way to become wealthy is to study the success of those who have already achieved what you want and then follow the same formula of success which they have followed. There are many great examples of individuals who have started with nothing and now have amassed fortunes. If they can do it, you certainly can do it too.

Our purpose here is to examine some of the principles of success others have used in creating their wealth.

1. Income.

It should seem obvious that in order to create any financial wealth one must first have income from one or more sources. That income can come from a job, a business, investments, or a combination of all three. All three sources can, if managed properly, allow an individual to build wealth. There are many stories of individuals who worked seemingly insignificant jobs who took care of their money and over time became wealthy.

While it is certainly possible to build wealth with income from only a job most of the people whose names are well known have created their wealth by starting their own business or becoming savvy investors. Starting your own business and investing wisely allow you to take advantage of a very important tool, Other Peoples Money (OPM). In the business world OPM is more properly termed leverage.

One of the most rapidly growing areas of business today is Network Marketing. Each day thousands of people are starting their own Network Marketing business. In fact, both Robert Kiyosaki and Donald Trump have said that if they were to start over in building their wealth they would do so in Network Marketing.

2. Eliminate Debt.

This step should be obvious, but to many people debt is simply a way of life. By eliminating debt you will immediately get a return on your money equal to the rate of interest on the debt you have retired. On credit cards that can be upward of 20%. It is interesting to note that those people who have high debt, particularly credit card debt, seldom invest in anything with returns exceeding 4% - 6%, if they invest at all.

You should have everything you want, which you can afford. If you can afford the monthly payment on something you want does that mean you can afford the item? Generally not!

While debt is an important tool to use, particularly in business, it should be minimized or eliminated on a personal level. Make certain that you understand the difference between good debt and bad debt.

3. Savings.

Pay Yourself First. How many times have you heard that but have not done any thing about it? It is essential that you have a clearly defined savings plan. To start you should be saving 10% of your income and then increase that as you are able. Everyone should have an emergency reserve fund equivalent to 6 months of your living expenses. Other savings plans should include saving for major purchases, and to take advantage of investment opportunities as they are available.

4. Spending Plan.

This area is where the wealthy really start to separate themselves from the general public. They have a clearly defined spending plan. They are disciplined and focused in where they spend their money. Just because they can afford an item doesn’t mean they buy it. While they may have big homes and expensive cars those items are low in priority to most truly wealthy individuals. Go online and find a photo of Warren Buffett’s home and you will see a conservative home which he has lived in for many years. He, and those like him, would rather spend available cash on another great investment.

It is important to understand the three different types of capital when developing your spending plan. They are Operating Capital, Investment Capital, and Risk Capital. The foregoing types of capital are also listed in the order of their importance.

Types of capital is an important distinction but to adequately cover the subject could take an entire book we will just mention them here and you can do some research so as to gain a complete understanding.

5. Investment Plan.

Most Americans spend more time planning their next vacation than they spend planning their financial future. Of course that includes investments.

Do you have any sort of investment plan? Do you have an investment advisor? Do you understand risk and know what your risk tolerance is? What return do you hope to receive, and where can that return be found with an acceptable risk? These are questions you need to answer in developing your investment plan, but if you do so with solid research and clear thinking you will be able do develop a investment plan which will give you passive income your entire life. That passive income is one of the purposes of a great investment plan. Passive income continues to pay you while you relax in your favorite vacation place.

The media, and others, have, for years, successfully dumbed down the American public into believing they have limited investment opportunities. Many people believe they are limited to bank cd’s and mutual funds when in fact there are many high grade, high return investments available to them. Do your homework and know that there are many tremendous investment opportunities available to you.

6. Minimize Taxes.

Make certain you have an exceptional tax advisor who can reduce your tax liability to the lowest legal amount. A few dollars spent getting the best tax advice will pay for itself many times over. Even if you are a tax professional it would be wise to have another trusted tax expert review your returns to insure you have maximized your filing returns.

If you as an individual are receiving a tax refund each year you should modify your withholdings. Allowing the government to hold your money for an entire year is a poor choice in savings. They pay you no interest and by changing withholding you can increase your monthly cash flow for whatever purpose you need.

7. Asset Protection.

All of the above strategies could be of little value if you fail to take proper action to protect the assets you have worked so hard to create. Depending on the type of assets and type of business you have will determine the type of legal entity that would best protect those assets and your business. In fact, you may need more than one legal entity to give you proper protection. You should get good legal advice from a qualified person regarding how to best protect all of your efforts. You may settle on forming a Corporation or a Limited Liability Company (LLC).

Another important discussion you need to have with your legal advisor is which state is best to domicile your entity. Different states offer different levels of legal protection so do you homework and make certain you are getting the maximum protection allowed by law.

Once you have developed a solid financial plan don’t forget the other important areas of a wealthy life. Those areas are Emotional wealth, Spiritual wealth, Intellectual wealth, Physical wealth, and a wealth of relationships. If all you have is money, but none of the other elements of wealth you will ultimately be unhappy, and probably broke!

The above principles of financial success have been used for generations by the wealthy. Because of space they are mentioned only briefly here but there are many recourses available on each of the subjects. If you are serious about building wealth, and leaving a legacy, you will do your homework and make certain you have a solid wealth building plan. Then you will take action. To your success.
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Eugene Rivera is an internet marketing protégé. He is the webmaster of Secrets of Online Success. Learn about all the money making techniques to achieve success on the Internet. Click on our webpage at http://www.secretsofonlinesuccess.info
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