Are you on a mission to build wealth? No matter what your dreams and aspirations in life, building even modest wealth can support your on your journey. Wealth isn’t just about how much money you have, it’s also about whether you have the assets to live the life you want. When you build wealth, you should do so with the mindset that you can cover any emergencies that come up, or partake in any opportunities. Ready to learn more? Read on for our guide to building wealth.

Building Wealth Defined

The exact definition of wealth building and financial freedom looks different to each person. However, we choose to look at wealth building through a Prosperity Economics lens. This means we believe in long-term solutions, as opposed to quick, “heat-of-the-moment” ones.

In other words, wealth building is about more than just income or accumulation. It’s about both factors, as well as long-term protection strategies. Without these protection strategies, the progress you make while you are building wealth can be curbed by taxes, fees, death, divorce, and so much more. 

Building wealth is best defined as long-term solutions to all three of these aspects: income, accumulation, and protection. 

Why is Wealth Building Important?

When looking at the above definition, it’s easy to see why wealth building is important from a Prosperity Economics perspective. We wouldn’t presume to identify a specific number that equals wealth. We think that true wealth is about how much freedom you have—freedom of time, money, and choices. By building wealth, you’re creating that freedom now and later. 

Wealth building allows you to create opportunities for yourself and your family. And by adding a layer of protection to your definition of wealth building, you’re also allotting for emergencies that have the potential to destroy the wealth you’ve created at a moment’s notice. You work hard for your wealth, it’s worth protecting. 

Wealth Creation Requires a Path

In your pursuit of wealth creation, it’s a good idea to have a clear path laid out. While you may change course over time, knowing the “directions” is a good way to get to your end destination. Otherwise, you may find yourself meandering and making decisions that don’t align with your financial objectives. 

You also don’t have to have every single step you take in your wealth creation journey mapped to a T. While this may seem like a better way to build wealth, it can leave you with very little flexibility. You want some options that give you wiggle room for the unexpected, that way you can move forward no matter what. 

If you do not know where you’re going, you can be sure that you won’t get there. Along the way, you may do something that financial media says is good. Yet if you don’t know how to maintain those choices or implement them for efficiency, you’re hardly better off. 

Wealth Building Strategies

As you build your path to wealth, remember that you can customize it for your life. You don’t have to do everything, and in fact, it’s probably better that you only start with one or two of these wealth-building strategies. Once you have consistency, you can add in a few more strategies. And before you know it, you’ll be on your way to wealth creation. 

Generate Income

Perhaps most obviously, wealth building begins with income. While everyone’s got an income, most people lack a way to generate side hustles or even passive income. The more you can increase your revenue, the more options you have with your money. 

There are many ways to increase your income or generate additional income. Examples include freelancing on the side, building your own business, offering paid courses or classes, and so much more. If you’d prefer to up-level your job skills, you can take courses and earn certificates through a program like Udacity. If it sounds easier said than done, check out our “Cash from Scratch” Guide to Creating Income. 

Wealth Accumulation and the Importance of an Emergency Fund

Another key strategy for wealth building is wealth accumulation. However, wealth accumulation alone will not get you where you want to be. Most people consider their 401k or IRA to be the “place” where they accumulate wealth, yet these options aren’t necessarily the most tax-efficient options and lock your money away where it’s inaccessible.

It’s critical that you accumulate wealth in a place with liquidity so that you can use it as an emergency fund. Having a liquid account that you can use also means that you can move money through it, which makes wealth-building much more efficient in the long run. 

When you save into separate accounts (one for college, one for retirement, etc), you actually weaken all accounts. Having a multi-purpose account can give you more liquidity for any decision you make with your money. Whole life insurance makes a good wealth accumulation account because you can use it for emergencies and opportunities, via the policy loan. And because you don’t have to withdraw funds, you don’t have to lose any opportunity cost. 

Another good place to accumulate money is in your Currence reservoir. Currence can help you reach financial freedom by creating a habit of saving (i.e. accumulating) first, and then using that money to create passive income and cash flow. 

The Importance of Investing

Investing is another critical piece of the wealth-building puzzle, however not like you may believe. When most people hear the word invest, they automatically think of the stock market. However, we’re of the belief that the stock market is one of the worst places to invest—it’s like gambling. The stock market is a wild and unpredictable place that benefits few, and very few have made their fortunes through stocks.

Market volatility doesn’t make for riches, because you often get stuck in a cycle of wins and losses. The problem is that every time you lose money, your investments have to work extra hard to get back to where they were, let alone grow beyond that. It can take years to recover from losses in the market, and yet people still choose to invest there every day.

We prefer alternative investments that aren’t correlated to the stock market. While all investments carry risk, there are many alternative investments that offer reliable cash flow. In other words, it’s going to increase your income. This means you can save more, and invest more, which only creates more opportunities. This is much preferable to money fluctuating in an account where it’s not very liquid. 

Some alternative investments include oil and gas, real estate (there are dozens of ways to get involved), bridge loans, bonds, and much more.

And no matter what, check out these investment questions to ask before you make any decisions.

How to Use Debt to Build Wealth

Another way to build wealth is through debt. We know what you’re thinking: Dave Ramsey says all debt is bad! While there is certainly such a thing as bad debt, there’s actually good debt too. Good debt is generally debt that you use to accumulate or build your wealth.

For example, if you use a loan to buy a rental property, that property is going to generate cash flow. With that cash flow, you can pay the mortgage and even have some money left over. Despite technically having debt, you’re not actually paying the loan with your own money. If you simply paid for the building in cash, you’d be out whatever your investment cost and any cash flow you get would be playing catch up. 

Using debt this way is called leverage, and it’s a strategy that most of the ultra-wealthy utilize to continue growing their wealth. 

Using Whole Life Insurance to Build Wealth

The last “piece of the puzzle” is whole life insurance, which we’ve mentioned a few times. Whole life insurance has many benefits, the first of which is that it offers income protection if you die. What this means is that even if you’re gone, your family will still benefit from the wealth you’ve created. Most people don’t consider what happens to that wealth when they go, despite most people building wealth with loved ones in mind. 

Another benefit is that you can accumulate wealth in a whole life insurance policy, thanks to the cash value. This cash value can be leveraged for investments that build your wealth, or it can be used for emergencies and opportunities that may arise over your lifetime. This makes it a multi-purpose account with incredible efficiency. You can learn more about the pros and cons of whole life insurance here.

How to Build Wealth from Nothing

Now that you see the possibilities, it’s time to start thinking about the path you wish to take. If you already have significant savings accumulated, it’s time to put some of it in action. 

If, however, you’re starting from “nothing,” don’t worry—there are still options for you. While your path will depend on your personal circumstances, it’s time to evaluate a few things. First, what’s weighing you down or holding you back? For example, if you have a lot of consumer debt, like credit cards, you may want to start by paying it down. Once you do that, you can start saving that cash flow into a whole life insurance policy.

If you just want to create a habit of savings so that you can build your emergency fund, look no further than the Currence app. With Currence you can learn to save first, and make it a habit. Then you can work with a wealth strategist to put that money to use depending on what you want to do with your money. If you’d like to enroll in Currence, email us at welcome@prosperitythinkers.com with “Currence” in the subject line.

Wealth Building Habits

Wealth isn’t created overnight; it follows when you create dozens of small wealth-building habits that inch you toward where you want to be. Don’t feel as though you have to make dozens of changes at once, though. Choose one thing, and work at it until it sticks. Then, choose the next objective. 

Wealth building is a lifelong process, and you won’t get there in one day. You won’t even get there in one year. (Even if you win the lottery, it’s not true wealth unless you can keep it and make it work for you.) So remember to be kind to yourself, and celebrate your wins along the way. It’s going to take time and effort, yet you can rest assured that with those things you’ll be much better off on your journey to wealth building.
We would love to help you on YOUR wealth-building journey. To see how you can get started, please book with us, or email your questions to welcome@prosperitythinkers.com.