The Three Rules of Wealth Building

I can remember clearly when I first started learning how to manage my money, I read, “The secret ingredient to building wealth is PATIENTS. Fear (not knowing what to do), anxiety (not knowing how to do it), and impulsiveness (either letting someone else do it for you or making a rash decision) are the enemies of wealth.”*

This was life changing. Fear, anxiety and impulsiveness were all I had and patience I had none. So I kept reading…

One of the first financial books I read was Rich Dad Poor Dad. I took two things from reading it the first time. 

1. I needed a financial education and
2. I needed assets

I didn’t even know what an asset was when I read about assets. Remember, everything I knew about money I learned from advertising, so, I read on…

It took a couple of years to make the transition from my old, “bad with money” me to the new, “getting better with money “ me but every step along the way taught me valuable lessons about how to manage my money. 

I learned the difference between what a bank says is an asset to what a millionaire says is an asset. And they are different. 

I learned that assets fall into four categories: 

1. Invest in businesses for passive income.  
2. Invest in rentals. Income producing real estate for cash flow. 
3. Invest in the stock market. This provides a bit of liquidity, which means you can easily get to it if another opportunity arises.    
4. Invest in commodities such as gold, silver, oil, royalties and/or intellectual property rights.  

While writing a class on wealth building I couldn’t easily find a satisfactory list of wealth building recommendations so I came up with the following:

The first rule of wealth building is to buy assets (using your current income).

The second rule of wealth building is to buy more assets (using your side-gig income).

The third rule of wealth building is to buy still more assets (from buying and selling using or creating your own small busines).

As you can see, if you are to build wealth there is only one way to do it, acquire assets. Assets that produce cash flow on a regular basis be it daily, weekly, monthly or quarterly. 

Choose assets that consistently produce cash flow. When you have acquired enough assets you will be free to chase your next dream. 

The seven income streams that millionaires use are: 

1. Earned Income: income from your day job. 

2. Profit Income: income from buying and selling. A small business?

3. Interest Income: income from lending money.  

4. Dividend Income: income from owning stocks. 

5. Rental Income: income from rentals. 

6. Capital Gains Income: income from assets that continually increase.

7. Royalty Income: income from others using your ideas. 

Investigate each of these income streams to determine which are best for you and your future. Then start acquiring assets.

* Retire Inspired by Chris Hogan