Learn the secrets of the wealth building cornerstones. A detailed plan for how to build wealth, including budgeting, getting out of debt and the secrets of how millionaires save.
Wealth Building Cornerstones: How Millionaires Do It
When people think of what a millionaire is, they imagine people like Leonardo DiCaprio (movie star), Elon Musk (inventor and investor) or Donald Trump (real estate tycoon). However, most wealthy people live a simple, quiet life. The road to riches is not always glamorous or exciting; In fact, becoming wealthy requires sacrifice and discipline. In addition, you must learn the wealth building cornerstones.
There are over 18 million people in the United States who have a net worth of one million dollars. In fact, some of those wealthy individuals probably live in your neighborhood. Perhaps they even live next door or work with you. Learning the wealth building cornerstones will put you on the right track to building wealth long term.
Furthermore, there is a popular belief that the wealthy attain their money the easy way: inheritance, winning the lottery or through criminal activity. The truth is that the majority of millionaires discovered the secret of the wealth building cornerstones. In “The Millionaire Next Door”, by Dr. Thomas Stanley and Dr. William Danko, it is revealed that most millionaires surveyed were self-made. These men and women started from scratch, with little to no money, and worked hard at saving and investing.
The Shocking Truth About Saving Money
Many People Get Bogged Down in Credit Card Debt, Preventing Them from Saving and Investing
In a December 2019 article by GoBankingRates, it was noted that approximately 70% of Americans don’t have $1,000 in savings! In fact, most people don’t have any savings.
This is a shocking statistic that shows how access to credit cards and lending have dominated our society. Unfortunately, Americans have adopted the idea that borrowing money for most things is normal. Yet, just a few generations ago in the early 20th century, people learned the hard way during the Great Depression that borrowing can lead to financial ruin. Having no savings puts you in a dangerous financial place.
Investor Warren Buffet is a Saver
A critical part of billionaire Warren Buffet’s investment strategy is saving cash. Historically, people’s lives depended on saving money. If a natural disaster struck or just bad luck, people could fall back on the money they saved to stay alive. Today, life is easier. Credit is widely available to most people and we frequently borrow money for cars, houses and purchases on credit cards.
But, saving money is a critical part of the wealth building cornerstones for several reasons. First, learning to save money requires that you learn not to spend your money. Warren Buffet famously said that the most important rule of investing is “to not lose money.” The lesson is don’t spend all your money. Instead, save some money. Saving money is an excellent habit to learn and maintain.
Second, saving money will give you the confidence to seize opportunities when they arise. When people live paycheck-to-paycheck, they waste their time struggling with bills, instead of focusing on future wealth creation. In addition, as your income becomes more limited in old age, you will depend on cash savings to pay for things like medical care and expenses.
Make Saving a Habit
Saving is a habit that can be learned over time and simply requires discipline. Become determined to reach your financial goal. Your personal determination to learn wealth building cornerstones will help you develop the discipline to save.
In addition, develop good habits of saving money. In the classic personal finance book, The Richest Man in Babylon by George Clason, the author implores the reader to set aside at least 10% of your earnings. This is a great rule of thumb for saving and investing because removing only a fraction of your income each month will likely not even be noticed or missed. Yet, this small amount of money is one of the wealth building cornerstones that will help you grow wealth.
Save Money Each Paycheck
10-15% of Your Income Should Be Invested
You don’t have to be a business owner or entrepreneur to be wealthy. There are many millionaires who live simple lives. They work 9-5 jobs every day, just like you.
One of the keys to their success is having a consistent source of income. Every month, or each paycheck, they divert 10-15% of their earnings to investment(s). An example would be investing in a 401(k), Investment Retirement Account (IRA) or Real Estate. Year after year, your money will grow and work for you to create wealth. It is these simple wealth building cornerstones that can change your life.
Make saving 10-15% of each paycheck easy by setting up an automatic money transfer to your savings account. For example, each time your paycheck is deposited into the checking account, have an automatic transfer set up that moves money into the savings account. Some people find it helpful to have a savings account that is in a different bank. This reduces the temptation to spend savings.
Live Below Your Means
Reduce Bad Habits like Meals Out, New Cars and Unnecessary Items
Forming good financial habits is critical for learning wealth building cornerstones. In many cases, frugal living is the cornerstone of financial success. This simply means spending less than you make. A simple monthly budget can assist you in determining whether you are meeting your goal. And these good habits can carry forward for a lifetime.
Unfortunately, living frugally is not popular in the 21st century. Popular culture dictates what “normal” consumer behavior looks like. And it’s considered normal to go out and spend money at restaurants, on vacations and the like. In addition, it’s “normal” to buy a big house and drive a new car.
Financially successful people don’t ascribe to normal behaviors. People with the millionaire mindset only purchase what is needed. They don’t buy new cars or fancy things. As a result, the extra money saved from this frugal behavior is put to work in investments.
Create a Budget
Budgeting Creates Consistency, Promotes Money Tracking and Teaches Budget Balancing
Being without a budget is like going on an adventure without a map. Your budget is your map to learning the wealth building cornerstones. When you create a budget, start by writing down in detail what your expenses are each month. Use paper, spreadsheets or whatever works. Provide as much detail as possible when listing your expenses. You may find it helpful to review past bank statements and receipts.
Having a balanced budget means spending less of your paycheck. Preferably, you will have a significant amount of money left over to pay off debt and save for investing. In short, everyone should budget, whether you are a large corporation or just one person.
There are many budget options online, including spreadsheets, mobile apps and even printable budgets. Check out our “Best Budget Planner” article for more detailed information and recommendations on how to make a budget.
Watch Out for Credit Cards and Debt
Credit Cards Can Prevent You from Saving a Million Dollars
One dangerous lesson to learn is overspending on credit cards. In the modern era, gaining access to credit is far too easy. The big risk that comes with credit is overspending. When you spend more money than is allowed on the credit card, or spend more than can be paid back, it can be a painful lesson in finance. But, sometimes difficult lessons can be valuable and last a lifetime.
If you make a mistake with a credit card, or overdraft an account, it can become a learning tool. Use the situation as an opportunity to learn from the mistake and implement better budgeting habits. Everyone learns the lesson of debt and compounding interest when we have to pay back what was borrowed, plus interest.
Pay Off All Debt
Most wealthy people did not get rich by borrowing money. In fact, most people with a large net worth know that one of the wealth building cornerstones is to avoid debt. They know that when you have debt, money is working against you. So it’s important to pay down all your debt prior to taking the next steps. Later, you can make your money work for you, not against.
Develop a Financial Plan
Learning the wealth building cornerstones requires a financial plan. Write down the details of what you want to achieve in your plan. If your goal is to own one million dollars in real estate, then plan accordingly. Include details of how you will acquire money to invest and how it will be allocated. In addition, set a timeframe for when you expect to achieve your goal. Your budget will be an addendum to the plan. Finally, review the financial plan frequently and assess your progress.
Develop Good Habits
Good Habits Include Budget Control, Staying the Course, Investment Knowledge and Discipline
Developing the wealth building cornerstones is critical on the path to acquiring wealth. Once you’ve established your goals and your financial plan, you must implement good habits. Good habits include:
- Budget Control
- Staying the Course
- Investment Knowledge
Budget control means that you operate under a balanced budget. Spending is controlled so that remaining cash flow is routed toward smart investments. Good investments are critical for converting thousands of dollars into millions of dollars.
Staying the course requires that you consistently repeat what you are doing, so long as you are successful. If something doesn’t work, it can be changed. But the power of earning from compounding interest is continuously investing money.
Being a good investor requires that you continuously educate yourself. You want to learn as much as possible about your investments. You will accrue knowledge and wisdom on different investment strategies over time.
Invest Early as Soon as Possible
Begin learning the wealth building cornerstones early. Many wealthy individuals credit their success not to windfall earnings, but to incremental investing over long periods. Compounding interest is a powerful tool that can work for you in growing your wealth.
Grow Your Income
Maximize Your Income by Starting a Business or a Side Hustle
There are many ways that you can improve your income. For example, start a small business out of your home. Explore what you like to do in your spare time and determine if you can make money doing it. For example, photography can be a hobby or a business.
Great Ways to Earn Extra Money Include Seasonal Work, Side Hustles and Starting a Business
One dirty little secret that successful people don’t share about their success is what they had to do to become successful. Successful people often work 2-3 jobs, work long hours and work to do things that no one else wanted to do.
It’s not glamorous to deliver pizzas or wash cars for extra cash. But sometimes to get ahead you have to swallow your pride and do what must be done. I’m not suggesting that you do anything illegal to make money; on the contrary, there are plenty of legal jobs that will earn real money for you.
Seasonal Jobs Include Retail Workers, Tax Season Workers and Vacation Season Workers
During the holidays, seasonal workers are needed in most areas. The Fall holiday season is the busiest shopping time of the year. Employers hire extra staff to help with the higher demand from customers. Examples include retail sales, delivery drivers and merchandise stockers.
Other seasonal jobs include working in the tax industry during tax season and working festivals and resorts during the summer or winter vacation season.
Having a side hustle has become more common these days. Unfortunately, many people work a second job simply to make ends meet. But there’s no shame in working hard to get ahead. Common side hustles today include:
- Uber/Lyft Driver
- Food/Grocery Delivery
- Dog Walking and Sitting
- House Cleaning
- Gig Economy Services (Fiverr)
- Freelance Work Online
- Wash and Detail Cars
Build a Business
There are Great Opportunities for Starting a Business, Including Service Industry Business, Home Based Business and Home Sales Business
There has never been a better time to start a business. The opportunities are endless for someone willing to put in the work. You can start a business locally in the service industry, such as delivery, massage, home/car repair, pet sitting/walking, babysitting, etc. None of these businesses require an office or a startup cost.
If you don’t want to start local service business, you can work from your computer at home. Sell things online on Amazon, EBay, Etsy, Facebook Marketplace or other platform. You can buy and sell new or used items. Make your own brand. There are many options for selling goods online.
Also, you can sell services online. Are you good at building websites, social media or marketing? Many businesses now have an online presence and they need marketers and SEO consultants to help them reach customers.
Final Word on Wealth Building Cornerstones
Operate a Business, Network and Work with a Financial Team
First, many wealthy individuals reach their goal quicker by operating a small business. Owning a small business allows you to control how the company operates and take more profit for the extra labor you put in.
Second, maximize the networking that you do with others. Participate in conferences or just promote contact with like-minded people in your area. The network effect can have positive financial benefits for you. Don’t isolate yourself.
Finally, surround yourself with a financial team. Seek out a respected tax professional, attorney, business coach, etc. Sometimes an ounce of prevention is worth a pound of cure. Staying in good legal standing with state and federal regulations can help you grow. In addition, these professionals can save you money in the long term.
Implement Wealth Building Cornerstones as Habits
Learning what has worked for other successful investors is the easiest and most secure strategy for success with money. Moreover, successful investors get up early each morning and focus on their goals. Investing money is a priority to them and their focus is on earning and business. Many successful people make time for self-development activities, such as exercise and meditation. And they make these habits part of their daily ritual.
These guidelines are the simplest path to creating wealth building cornerstones. Want to learn more about saving and investing?
Disclaimer: It is important to note that Piggy Bank Coins does not provide financial advice. We don’t endorse or recommend any financial investments. Instead, we provide information for educational purposes to those seeking knowledge regarding personal finance. However, in the spirit of transparency, note that the author is an investor in cryptocurrencies, precious metals and some equities.
In addition, The Federal Trade Commission (FTC) requires that Piggy Bank Coins disclose to readers that we may receive commissions when you click our links and make purchases. However, this does not impact our reviews and comparisons. We try our best to keep things fair and balanced, in order to help you make the best choice for you.