The 4 Myths of Building Wealth
What is the key to building wealth? What if you don’t have any savings, or you’re barely paying the bills? How can you become wealthy when you’re living paycheck to paycheck right now? We will explore four myths about building wealth, dispel them, and provide some ideas on how to become financially stable.
Myth 1: You need a high income to build wealth.
A lot of people think you have to have a 6 figure salary or more before you can start building wealth. The truth is, you can build wealth with any income! It doesn’t matter if you’re on minimum wage or straight out of college on your first job only making $35000/year, or even if it’s a million dollars a year, building wealth is easier than you think if you make the right decisions with your money.
You can start investing your money wisely and allow your money to start working for you, not just your salary make more than what you would on your salary alone. You can start try saving your money or investing in yourself the money you make into to start side hustles:, selling things that are lying around your home, becoming an investor etc. The key is to start somewhere.
Consider looking into some index funds, these funds invest in the stock market as a whole, at Vanguard or another mutual fund company for your 401(k) if that is available to you. You can also start a Roth IRA outside of your companies 401(K) that allows you to invest “after-tax” dollars so when you take money out at your retirement it is tax free. This will allow you to diversify between taxable and non-taxable investments at your retirement. In fact, you should have more than one retirement account with different funds in each one if possible. It’s best to be diversified rather than putting all of your money in one investment because not everything may do well simultaneously.
Myth 2: Income is the same thing as wealth
People tend to equate income with wealth. Especially in our society where we’re conditioned by the media that having a lot of money is the only way to be rich and successful. We forget that you can still be wealthy without a million dollar salary and many 6 and 7 figure earners are NOT wealthy.
The thing to understand about income and wealth is that your income, whatever it is, is what you USE to create wealth. Choosing to invest, no matter what your income, is how most millionaires become wealthy in the first place. They choose to invest even if it means making less money on paper. Remember, it’s not what you MAKE, it’s about what you KEEP. It’s all about making your money work for you, not the other way around. And also how much of what you’ve kept, is actually working FOR you, instead of sitting dormant in a simple savings account.
Myth 3: Building Wealth Requires Sacrifice
Nowadays, our culture is obsessed with living life on the edge and sacrificing for the good of our future. The hustle culture of today tells people to put off having fun today in order to work extra hard now so you can be wealthy in the future. The truth is, however, you don’t necessarily need to give up having fun right now to build your wealth. There are other ways you can go about this that do not involve sacrificing your current lifestyle.
If you have to spend money on something, consider if it’s worth it. For example, if you’re considering getting something that would take your attention away from your goals, then maybe that thing isn’t worth it for you right now. Or perhaps you could delay the purchase until you’re making more money.
Even investing a small amount of money can have big payouts in the future thanks to the magic of “compound interest”. Compound interest builds long-term wealth because it lets your money make more money over time.
Pro Tip: Investing in a retirement account is an easy way to invest small amounts of money and feel secure about the future.
We’re not saying that having fun isn’t essential, but we encourage you to think about what you’re spending your money on and whether those things bring you happiness.
Myth 4: I’m Too Old to Start Investing
Another myth we can safely mark as false because you can start investing at any stage of your life. The longer you wait, the more you’ll lose out on compound interest but It’s never too late you’re never too old to start building your wealth.
If you’re closer to retirement then consider investing more conservatively with bonds or choosing index funds that are less likely to lose value over time. Your financial situation might change depending on your age, your family size and your career growth. You might also see a sharp decrease in your income during retirement so you’ll need to be prepared for that.
In order to make smart financial decisions, consider your current and future personal situations as well as what investments are safest for you.
So no matter what stage of life you’re in, you can still start investing and building wealth. We hope this article has shed some light on some pretty big misconceptions about building wealth. What are you doing to build your financial success? Let us know in the comments!
