If you want to learn how to build wealth and live life to your fullest potential you have come to the right place.

We all dream of living on a beach, spending time with the people we love, and doing work we are truly passionate about.

Unfortunately, nothing in life comes easy. There are tough decisions we must make to put us on the right path to achieving everything we could ever want in life.

Do you want to look back on your life in regret knowing you could have had more meaning? Whether it be spending time with family, starting that business you always wanted, or travel the world, everybody has something to aim for that is meaningful to them.

If you want to live the life you desire, then you must be wealthy enough to do it. Wealth has two components:

1.) Financial Wealth

2.) Mindset Wealth

Financial wealth is having enough money to do what you desire. While money doesn’t bring happiness or meaning in life, it is a necessary component to get us to where we want to be. Anybody can travel the world on a budget, and anybody can walk the beach on a sunny day, but at the end of the day, money helps fuel everything.

Money also creates more time. Money is infinite and time is not, therefore, we must spend time pursuing what is enjoyable in life. Unfortunately, most people trade time directly for money by working a job.

Working a job means income is limited. If you trade time for money like a majority of people do, then you will never be able to experience all the things you want in life.

But what if there was a way to flip the script? A way where you can make more money AND have more time?

Luckily there is! If you play your cards right, you can build substantial financial wealth and do everything you ever wanted in life. You don’t have to settle for the status quo.

In this article, you will learn the principles of building financial wealth.

Mindset Wealth is being mentally strong to get to where you want to be. You must have a mindset that allows you to make decisions, take action, employ discipline, and not give a damn what others think.

A lot of people talk about their success but they never seem to mention the mindset it takes to achieve that success. This is incredibly important because as you begin your venture of building financial wealth, your mind will go in so many directions.

One day you will be motivated and the next day you will want to give up. This can even happen in a matter of minutes. You must be able to control your mind to handle everything that comes at you.

Although financial wealth is the driving force to having more time to do the things you enjoy, you must have the right mindset to lift off the ground and keep going when things get tough. And yes, they will get tough.

Building wealth is not a hack, it is a campaign broken down into seconds. Every second is important and the faster you learn and take action, the sooner you will get to where you want to be in your life.

 

Building Financial Wealth

 

Financial wealth comes down to three core components that are extremely simple, yet most people don’t understand them.

1.) How much income are you earning?

2.) How much are you spending?

3.) How much money are you saving and investing?

 

If you understand the three concepts above, you can create a foundation and roadmap for yourself to obtain financial freedom.

Understand Your Current Situation

First thing first, input your numbers in a budget spreadsheet using Google Sheets or a pen and paper. Write out all your income sources for the month, and all your expenses.

Income for most people will only come in the form of a paycheck from an employer. If you are a go-getter, however, you can make money from side jobs.

Expenses will include food, housing, transportation, cell phone, and personal care.

Make sure to document everything within the month to get a clear understanding. It might be painful for some of you because your expenses are greater than your income. This is completely okay because you can turn it around!

You can most likely find all your income and expenses from your bank. Simply log into your bank account and you should be able to find all your transaction history, assuming you use your debit or credit card for everything.

Once income and expenses are determined, you can subtract expenses from income and get your savings amount. Whatever the number is, you have this leftover and can choose to save it for a rainy day or invest it to earn more income.

Understanding how much income you currently make, spend, and save will allow you to decide the next step.

The next step is to save as much as you can, earn as much as you can, and invest as much as you can as early as possible. These three factors combined are the ultimate formula for financial freedom.

Investing

A great way to obtain financial wealth is to invest in the stock market. 

It sounds scary and risky for most people, but in all honesty, investing is really easy to understand, and by using certain strategies you can minimize the risk.

You don’t need a degree in finance, you don’t need to be good with numbers, and you don’t need a lot of money to get started.

You simply need to understand the concept of compounding interest and the time value of money.

Compound interest is the 8th wonder of the world according to Albert Einstein, and he was a pretty smart guy.

By investing in the stock market, on average you can generate a return of about 8% year after year. Let’s say you invest a principal amount of $1,000 and earn 8%. After the first year, you have $1080.

After the second year, you will have $1166.40. Once again, you get $80 for the initial investment of $1000, but you also get 8% of the first $80 which is $6.40.

After some time elapses your money will grow exponentially.

As you can see, the majority of your money comes from compound interest.

Investing early matters because your money has more time to compound. Having a few extra years, months, or even weeks of compounding can be significant.

Larger investments early on will lead to large amounts of income. The above graph only represents an initial investment of $1000 at 8% interest. If you invested an initial amount of $10,000 you will have well over $200,000 in 40 years.

Realistically, you will invest money each month throughout your life which will generate even greater returns because the money has more time to compound and you are investing more.

Money has a time value too, this is known as the time value of money. $1 today is worth more than $1 tomorrow because money today has an earning potential attached to it.

If you give me $500 today I will gladly give you $500 one year from now because I can take the year to earn interest.

Every dollar amount has a future value. You just need to know how many compounding periods there are and how much interest will be compounding per period.

My favorite example is a cup of coffee.

Imagine you buy a cup of $3 coffee every single day for a year. This is $1095 per year!

Now imagine rather than buying that coffee, you invest the money into a stock portfolio with an 8% annual return.

There are two options here:

  1. – $1095 per year + coffee
  2. + $1095 per year + interest

Look at that difference! Any time you buy coffee (red), you are giving up the compounding potential (blue).

Notice any difference? The blue gets bigger way faster.

Buying coffee for 10 years will cost you way more than $10,950. It will actually cost you an additional $15,000 because of the earning potential you are giving up at a total of $25,000.

Opportunity cost is everything. Anytime you purchase something you should always be thinking about what you are giving up in the future.

A $3 coffee at Starbucks every morning is a tradeoff.

This applies to everything, not just coffee. In fact, I love coffee but I get the same amount of enjoyment drinking it at home as I do in a coffee shop. You must find a good balance between what you enjoy and understand what you give up.

If you don’t realize what you are actually giving up, you will be poor your entire life.

Rather than trading time for money at your job, you can take your income and begin to invest it. With the power of compounding interest, your money will work for you!

Investing doesn’t mean day trading. The investing I talk about is long-term. You must be patient, control emotions, and have a diversified portfolio.

I choose to invest in M1 Finance because it allows for fractional share investing. This is amazing because it allows anybody to purchase fractions of a company and diversify their portfolio.

Amazon is a great company but you don’t want to put all your eggs in one basket by paying thousands of dollars for one stock.

With M1 Finance, you can purchase $100 of Amazon and capture returns on a proportionate basis while diversifying your remainder in other stocks.

M1 Finance Review

Smarter Investing: M1Finance.com
You can live off returns and retire early.

Let’s say you have $1,000,000 invested in a portfolio that generates a return of 8% each year (after inflation). This means you are earning $80,000 on the annual return alone, and if you can live on half that amount then you are able to reinvest the remaining $40,000 and your return the next year will be even greater.

Depending on your lifestyle, your freedom number will be different. Living in Thailand is much cheaper than living in New York which means you need less money to live off the returns, it all depends on your lifestyle.

99% of people think retirement happens when you turn 70. This is the old way of thinking.

You can retire much earlier! Make your money work for you through the power of investing and you will have more time to do things that are meaningful to you.

Time is precious and limited. Don’t waste it spending 40-50 years of your life working towards other people’s goals. Spend time to follow your own dream and complete your own goals.

Although investing is amazing for building financial wealth, you need to earn income if you want to speed up the compounding process.

Don’t settle for investing your current income. Find a way to make more income and invest it to speed up the wealth-building process.

Getting to that $1 million number can give you freedom, but the problem is just that, getting to $1 million. You will get there eventually by investing your current income, but retiring at a younger age such as 30 will require you to 10x your income.

 

Increase Your Income

Let’s face it, people are lazy! Most people don’t have the motivation or drive to increase their income outside of their day job.

They settle for the status quo of working 8 hours each day only to come home and watch TV or browse social media.

I’m going to be brutally honest. If you want to build wealth quickly, you must earn income outside of your job.

Luckily we live in a time where you can make money from a computer anywhere in the world. Yes, it takes effort and it isn’t easy, but your effort will be rewarded.

Income comes down to two forms, active and passive.

Active income means trading time directly for money.

Passive income can be earned while sleeping and is scalable.

Although I preach freedom of time, a job is the most common form of active income and a (relatively) stable starting point to catapult you in your wealth-building journey.

Job

Undeniably, getting your first job out of college is a feasible method to garner income. You need to start somewhere right?

If you find yourself at a job, I encourage you to soak up every bit of knowledge possible and make connections because once you walk out those doors, you will want to have gained something other than a paycheck.

No, you don’t have to stay at your job forever.

Achieving financial independence at a young age requires you to earn more income, period. Unfortunately, millions of people rely on only one source of income which happens to be their day job.

Assuming nothing goes wrong and you get to keep your job, this income is going to be fixed. Making $40,000 per year is the most you are going to make for 8 hours of the day.

Luckily for you, there are 16 more hours in the day where you can earn more income.

Active Income Side Hustles

You can’t make $100,000 from your $40,000 per year job. Fortunately, there are so many things you can do outside normal working hours that generate active income.

I like to think of active income side hustles a job outside of a job, the only difference being you can work on something you are passionate about.

You can slowly chip away and incrementally build something of value. There’s no way you can quit your full-time job without a plan and suddenly make six figures overnight. Rome wasn’t built in a day, it took time.

Examples of active income side hustles

  • Freelancing
  • Mowing lawns on the weekend
  • Selling products on Etsy or eBay

No, these alone aren’t going to make you a millionaire overnight because you are trading valuable time for money on something that isn’t scalable. You can only mow so many lawns in a day.

The point is rather than coming home and watching Netflix or doing something where you get no value, you have the opportunity to earn more income.

Passive Income Side Hustles

Passive income side hustles are what really give you the opportunity to build wealth quickly because more often than not they are scalable.

Passive income flows to you at all times of the day through very little effort over time. An example of this is investing in stock and bonds (not day trading!), making a YouTube channel that generates ad revenue, getting affiliate revenue from a blog, and creating an online course.

Initially, you put a lot of effort into building these income streams, and eventually, the snowball effect occurs where you get more traction.

YouTube videos and blog posts last forever and if you create high-quality content people will keep coming back over a long period of time.

Examples of passive income side hustles

  • Investment Returns (long-term investing)
  • YouTube
  • Affiliate Marketing
  • Online Course
  • Real-estate Investing

There is so much content on the internet about passive income, but the fact of the matter is that you must make your money work for you.

One of my favorite quotes comes from Warren Buffett, he said: “If you don’t find a way to make money while you sleep, you will work until you die.”

Imagine earning an income while you are sleeping.

Somebody in Asia purchased your online course or watched your YouTube video and made you marginally more wealthy. This is an extremely powerful form of income if you can build it properly.

If you keep chipping away at your side hustles you will eventually reach a point where you can quit your day job and focus more effort on the things you enjoy doing. Perhaps you can create two YouTube videos per week and grow your passive income even faster.

Don’t Give Up

All of this is easier said than done, but you have to stay consistent. Believe in what you are doing and don’t give up no matter what. So much initial effort is put into side hustles and when you don’t see results right away it can be discouraging. 

I enjoy writing business plans for startups in my free time through the Fiverr platform. I created my account in August of 2019 and didn’t get my first gig until 3 months later!

After that first gig, an amazing amount of people started reaching out to me for work, it was absolutely crazy! Now I have an extra $1,000 in my bank account and a great experience working with people from around the world.

Working your job and pursuing side hustles (both active and passive) is how you can increase your income and the first part of obtaining financial independence.

Save Money

It doesn’t matter if you make $40,000 or $100,000 per year. If you are spending more than you make, you will never build wealth or reach financial independence.

While you earn more income through your job and side-hustles, you must also be willing to save so you can and invest it.

You don’t need a brand new car after landing your first job, you don’t need to eat out every day of the week, and you certainly don’t need to stop at Starbucks every morning on the way to work. 

You should be saying as much money as possible and investing that into your $1,000,000 portfolio. There is truly only so much money you can save, so find a way to maximize it while living a meaningful and happy life.

You must pay for the necessities such as food, living, and transportation.

I’m not saying you need to eat beans and rice every day and live on the verge of homelessness. You need to enjoy life too.

But trust me when I say this, there are many things you can cut back on. Sometimes all it takes is a change in perspective on life and happiness.

A great way to make each decision when buying something is to ask yourself the question: What value is this adding to my life?

If you can honestly answer this question then go ahead and make the purchase. But if you keep buying things just to impress your friends and family you really need to rethink your way of life in my humble opinion.

You should understand the opportunity cost associated with whatever you are buying. I guarantee that if you realize buying a Mercedes to impress your friends is costing you hundreds of thousands of dollars of earning potential and time, you would be more willing to save.

Do this with everything and you will save enough to invest and build wealth.

Live YOUR Life

Listen, I’m not trying to tell you how to live your life. I am just giving you my principles for building wealth and reaching financial independence.

At the end of the day, only you can decide what to do and nobody can take that away from you.

I’ve been at this point myself. A few years ago when I traveled to Asia for the first time, my parents were so against it. Unsafe and expensive is all I heard from them.

I went anyway and have been back about five more times since because it provides so much personal value to me.

I implore you to purchase things that are valuable to you.

Mindset Wealth

Mindset is the number one reason why successful people are successful.

Making money is only one piece of the puzzle to build wealth, the rest is having a strong mindset. While on the journey to obtain financial freedom, life is going to throw bricks at you.

Are you going to let bad things get in your way and stop you from following your dream and reaching your goals?

You will feel tired and want to give up. Having a strong mindset will allow you to achieve your goals even when your body feels tired.

You must find the will to power through when everything else around you says no.

Take Action

Often times the failure to build wealth is due to not taking action. People don’t take action because they live in such a comfort zone and are scared of venturing into the unknown.

Whether you take big or small steps, the ability to act upon your dreams is the single greatest milestone you can make.

Lets put it this way, you will fail 100% of the time you don’t try.

Your probability of success is much greater simply by taking action.

Have Discipline

Taking your first step is one thing, but having the discipline to take the next 10 is an entirely different animal.

Wake up early and spend every waking moment doing something that creates value for your life.

When your body hurts and you feel like resting you must keep going. Your mind is designed to stop you from things that are seemingly harmful.

Your initial thoughts will be to give up. If you have the discipline to sit down and work, your chance of success increases greatly.

Be Yourself

The one thing we can control in life is ourselves.

Focus on things that bring value to YOU, not to others. On a deep level, nobody really gives a damn about what happens to you.

Yet, people live their life as though they have to impress people all the time.

Whether it’s the pressure to please your family by landing a job after college or purchasing a fancy car you don’t really need to impress the neighbor, the concept holds true for most people.

Blocking out all the external forces in the path to building wealth is crucial for success.

Friends will ask you to go out and buy drinks, family will pressure you to follow the status quo and never follow your dreams.

“Grandpa worked for 50 years, dad worked for 50 years, and now you must work for 50 years.” That is POOR thinking.

Be bold enough to follow your intuition and stray away from what society wants you to do. Be yourself and don’t settle for anything less.

Start Building Wealth Today

There is no better time to start your journey of building wealth than right now. Discover your muse,  start working on that side hustle, stay strong mentally, and you will be on the path to insurmountable wealth, and have the ability to live the life you want to live. If you don’t do it now, then when?

jacobpippenger

Author jacobpippenger

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