I love the concept of wealth creation, but it can be interpreted in so many different ways. Some people think about making money, others about collecting assets and more still about their health and life wealth. I spend a lot of time thinking about it myself and while I feel that all of these things contribute to my overall wealth I’ve never really been able to define an approach to what is wealth creation.
Wikipedia defines wealth as the abundance of valuable resources or material possessions, basically this means that you are considered wealthy if you have a lot of something that others value. What Wikipedia and many other sites don’t tend to tell you about wealth creation is how to get these things.
How to create wealth
I really like describing things in simple terms, I also like to see things instead of just having them explained to me. For this reason I’ve come up with a very basic equation to describe wealth creation as I see it.
OK, so the term ‘equation’ is probably a little too grand in this case, if you don’t like it call it something else. What I’m trying to demonstrate is an approach to having anything you want using a method that will never fail.
This is not as simple as it sounds and while it might not look too sexy, if you approach wealth creation in this way you can not miss.
Let’s take a look at some examples
Everyone is interested in money to a certain extent and the way most of us make it is by working for someone else. If you are really clever you may find a way to do it for yourself, but fundamentally you still rely on other people to pay you. In order to create more financial wealth you need to get better at what you do, learn new skills and offer something that others are willing to pay for. It takes time to develop these skills and there are generally few shortcuts, however if you stay focused on your goal and work towards it with a consistent approach your chance of success over time is pretty high.
My wife and I have saving accounts for just about everything and we stash away small amounts with every pay. Individually these amounts aren’t very impressive, but over time they can make a huge difference. This is the most basic and absolutely the most effective way to grow your financial wealth and have the things you want without getting into trouble. Consistency is the key, not just in saving, but also in watching what you spend as well.
You may disagree, but I feel that earning money is quite different to making money. Making money tends to suggest it is just appearing without the need to earn it first, it probably comes as no surprise that I’m a huge fan of this theory too. I think that this is completely possible to realise, you can see it through compound interest on your savings, where the interest on the money you have saved begins to make money all by itself. Sometimes it is easier to see (and can happen faster) through the returns you receive through various investments. Once this begins to happen, you are well on your way to a comfortable retirement.
Maintaining your health
Ask anyone that does regular exercise an they will tell you that consistency is the key to success. Skipping sessions and trying to make up by doing more later will not get you the same result as the one you get with a consistent approach (this is exactly the same result you get if you put off saving and investing as well). Find ways to get motivated by doing the things that interest you and will get you out of bed, off the couch and outside. Do it consistently and you will never need to worry about that aspect of your life wealth.
Having the things you want
Applying the wealth equation to this area of your life can impact your life in a major way. In a society where the emphasis is placed on instant gratification, the ability to understand your financial position and live within your means will give you a huge advantage over the long term. By all means I think that you should have the things you want, but you can’t have all of the things all of the time. Find creative ways to have them without negatively impacting your finances and you will feel a whole lot better about them too.
Doing the things you want
I think that doing what you want is a great driver, but it can also cause some serious wealth creation problems as well. If you are unhappy in your job, or can’t commit to doing something then your ability to earn may suffer. If you want to party or travel, then this is going to impact your savings. If you want new cars, all the latest gadgets and bigger and better homes, then your ability to make money will likely be reduced. If you would prefer to sit on the couch, watch TV and eat more calories than you burn, your health and lifespan are going to take a dive.
Don’t let the fear of the time it will take to accomplish something stand in the way of your doing it. The time will pass anyway; we might just as well put that passing time to the best possible use.
Having and doing the things you want is great, but you need to be conscious of your choices and the impacts they may have. Don’t view it from one side though, ultimately it’s really important that you do what makes you happy. That very well may be partying or travelling, so go do it. In fact, do any of the things that I have suggested might impact your wealth negatively if it is going to make you happy, because wealth creation is about you.
I think that wealth creation is about consistency over time, so do the things that will make you happy now and in the future.
What is your approach to wealth creation?
Image by ToniVC