6 Timeless Wealth Creation Principles That Will Help You Get Rich
Great wealth-building strategies tend to not change over time.
Photo by Sharon McCutcheon on Unsplash
While presidents come and go, the economy may dip, and new financial assets are constantly being created, the approach to creating wealth is common across generations.
While the context for making money might be different, the principles for creating long-term wealth are timeless.
You can learn valuable business lessons from what made Henry Ford rich and apply them to your situation. While you don’t need to start manufacturing cars, you can create the mindset, ownership, and leverage to become rich.
Wealth building is a scientific formula that endures through time.
And it’s never been easier than before.
#1 This Stops More People From Quitting Even Before They Have Started
You can’t aim to build wealth with $2 thinking.
The journey towards building wealth starts with the battle between your ears.
You may face real barriers to getting rich. Upbringing, education, or disability, but most people quit building wealth long before biology becomes a factor.
Here’s the truth…
I can’t promise you’ll be the next Warren Buffett, but you can get rich within the context of your environmental and local economic constraints. Whatever they may be.
But pessimism will kill the seeds of any wealth-building strategy you implement. If you secretly despise wealth or believe it is unethical, then you won’t be wealthy.
Almost every wealthy person I know is an optimist. Elon Musk famously said on the Joe Rogan Experience, “I would rather be an optimist and wrong than a pessimist and right.”
You have to be optimistic if you want to create an electric car start-up or launch rockets into space.
Optimists will see money-making opportunities everywhere.
The foundations of building wealth start with your mind.
#2 Understand These Two Principles First.
“Ownership is not the most important thing.
It is the only thing that counts”
— Felix Dennis, Founder of Maxim Magazines.
Without ownership and leverage, you won’t get wealthy.
Let’s start with ownership.
You will not get rich renting out your time. Even if you’re a well-paid doctor or lawyer, if you rely on another person or organization for your monthly salary, you will still live your life working poorly.
Your lifestyle tends to increase in proportion with each salary increase. You become dependent on that income stream and build a life that relies on it.
That’s not building wealth. That’s building an addiction.
Nassim Taleb famously said, “the three greatest addictions are heroin, carbohydrates, and a monthly salary.”
You need to own equity instead.
The doctors and lawyers who do get wealthy are those who create their own practices or clinics. They build their own equity and brand for themselves and get other people to work for them.
In short, to become rich, you must be an owner.
Talent or hard work alone doesn’t make you rich.
Ownership of your talent and hard work makes you rich.
Once you’ve got ownership, look for leverage.
There is a limit to how many hours in a day you can work, especially as demand for your services increases.
Building your own business means you can apply labor, capital, community, and technology as a form of leverage.
You can get people to work for you, reinvest capital to build new services or products, sell your services and products via email subscribers and automate tasks via technology.
Ownership and leverage allow you to build a business that makes money while you sleep, go on a holiday, or decide to take a day off.
“If you don’t find a way to make money while you sleep, you will work until you die.” — Warren Buffett
#3 Never Forget That Wealth Is Created by…
solving a problem at scale.
Social media companies solve the problem of human-to-human connection at scale. Uber solves the problem of easy transportation at scale. Udemy solves the problem of cheap knowledge at scale.
Once you have decided to back yourself, understand how to use ownership and leverage, start looking for problems to solve.
This isn’t rocket science.
Begin where you are naturally inclined.
The right combination to finding a problem to solve is genuine interest in the topic, a natural predisposition to solving the problem, and the ability to do so at scale.
Give people something they want but can’t get without you.
If you’ve got the right level of will, skill, and execution, you will get paid handsomely.
#4 Compound Interest
Great things take time.
Rome wasn’t built in a day. And you won’t get rich overnight.
No matter what YouTube ads you see or what financial guru says, you can’t get rich quickly or easily.
Be patient with your results but impatient with your actions.
Even the wealthiest investors in human history had to be patient.
“81.5 billion of Warren Buffett’s $85 billion net worth came after his 65th birthday”, writes Morgan Housel.
#5 Diversify, Diversify, and Diversify Some More
Once you’ve made your money, it is time to start diversifying.
Don’t leave all your eggs in one basket. Start creating more money baskets with differing levels of risk and correlation.
Never peg your wealth to one person, organisation, or sector. People, companies, and entire industries have disappeared overnight.
The ex-employees at Enron who received generous stock options and a generous pay package suddenly found themselves broke, out of a job, and all their equity worthless.
Not to mention the damaged reputation and stink from being associated with a fraudulent company.
Diversify into markets and industries that don’t correlate with each other. When one goes down, one may go up, and another stay the same.
The true test of diversification is when something bad happens, you will never be wiped to zero unless the whole world is ending. If that happens, you’ve got bigger problems than building wealth.
#6 Never Stop Learning
The day you stop learning and growing is the day you die.
Sounds grim and harsh, but that’s the reality.
If you aren’t continually evolving, you’re repeating.
Consume books, podcasts, and online courses daily. Hire a coach to find your blind spots or to teach you new skills.
There is an endless amount of free high-quality content on YouTube that can teach you the basics of any skill you want to learn.
Your level of wealth is a reflection of your skills. Add more skills to create more wealth.
Summary:
No one becomes wealthy by accident.
Its requires intention, hard work, and ruthless execution.
But you already knew all of that.
The formula for creating wealth:
(#1) mindset +( #2 leverage x ownership) + (#3) solving problems at scale
The formula for keeping wealth:
(#4) time preference + (#5) level of financial diversification + (#6) learning rate
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