Yahoo Finance ‘The odds were stacked against me’: How to build wealth from the ground up — the easy (and correct) way
There’s a misconception that most millionaires inherited their wealth; they went to the “right” school and had the “right” connections.
But while being a trust fund baby can give you a leg up, it doesn’t guarantee success in life — financial or otherwise.
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Indeed, Thomas J. Stanley, author of The Millionaire Next Door, consistently found that at least 80% of American millionaires are self-made. And 42% started out with a net worth of zero (or less!).
“There is a tremendous amount of socioeconomic mobility in our country,” Stanley wrote in a blog post before his death in 2015. “Even within one generation people tend to encounter this mobility by moving up or moving down.”
Building wealth starts with a mindset
Previous studies have found that money habits are formed in early childhood and set by age 7. So, if you grow up without money, watching your parents scrimp from paycheck to paycheck, you might be more inclined to believe that becoming a millionaire is impossible.
“This isn’t some fluffy mindset BS,” says Mark Tilbury, a seven-figure CEO and social media financial educator, on his YouTube channel. “If you can’t even believe something is possible, then how on earth are you going to do the work required to become wealthy?”
Tilbury wasn’t born into money. “The odds were stacked against me. I was a ginger working-class kid without a penny to his name.”
An important step in changing your mindset is being “careful about who you listen to,” he says — whether it’s friends or family who give you unsolicited financial advice, or financial “gurus” who peddle get-rich-quick schemes. If something sounds too good to be true, it probably is.
Read more: Suze Orman says Americans are poorer than they think — but having a dream retirement is so much easier when you know these 3 simple money moves
A good job won’t necessarily lead to wealth
Another myth is that getting a “good” job — like becoming a doctor, lawyer or CEO — leads to wealth. Stanley’s research found that only 3% of millionaires are physicians and only 9% are corporate executives. On the other hand, 19% are small business owners.
In other words, a high salary doesn’t determine whether or not you’ll become a millionaire. Rather, building sustainable wealth is about managing your costs, saving your money and investing the right way — not in get-rich-quick schemes.
There’s no single path to building wealth. For some, it’s entrepreneurship. For others, it’s climbing the corporate ladder.
“Studies have actually found that you’re more likely to build wealth faster by job-hopping rather than staying loyal to one company,” says Tilbury in his YouTube video.
But, if you “pick the employee route,” he recommends choosing a career that “isn’t dependent on how many hours you work, but on the results you achieve.” It could also mean looking to “upgrade” your job every few years or starting a side hustle to make extra cash.
Taking control of your money
Building wealth isn’t just about your salary, but about taking control of your money.
That starts with budgeting. There are several budgeting techniques to choose from, such as the 50:30:20 rule (where you allocate 50% of your take-home pay to essential expenses, 30% to non-essential expenses and 20% to savings and investments). Financial personality Ramit Sethi recommends a conscious spending plan; others promote “extreme” savings such as Financial Independence, Retire Early or FIRE.
While you can trim your expenses, you can also focus on growing your income. That might mean taking professional development courses to advance your career (so you can get promoted or find higher-paying work). It could also mean looking for ways to expand your small business or generate passive income.
But income alone isn’t enough. Investing your money — such as 20% of your take-home pay or the money you generate from a side hustle — means you can make your money work for you. Start by educating yourself about the terminology.
“Never invest in something you don’t understand. And even if you do believe what you’re investing in, don’t put all your eggs in one basket,” says Tilbury.
Most financial experts recommend diversification, which reduces your risk exposure by spreading out your investments. But diversification doesn’t just apply to stock market investments.
For example, Tilbury has also diversified his portfolio by investing in real estate, classic cars and high-end timepieces. “This approach allows me to spread my investments across various industries and asset types,” he says, “further mitigating risk and increasing the potential for good returns.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
