December 1, 2023

Steps How to Build Wealth from Nothing Starting Today

1. Educate yourself about money
Our mind-set is always the first thing that needs to change before we can truly approach any larger transformations in our lives.
The first step to building wealth from nothing is thus to invest time in your financial education. Become familiar with essential terms like income, expenses, net worth, return on investment, passive income, and financial independence, among others.
Read books, listen to podcasts and interviews, take courses, and follow financial education blogs.
Keep in mind that financial education, like every kind of education, must be a continuous activity. Never stop learning.
But a word of caution is important here. The democratisation of financial information means there is a lot of inaccurate information out there. Ensure you only follow reputable blogs that will provide genuine information and direct you to resources from trusted and successful investors, business people, and financial advisors.
2. Get a regular income source
It’s hard to build wealth from nothing without a regular source of income. You cannot invest without saving money, and you can’t save money without a regular income.
This is to say that people don’t build sustainable wealth from multilevel marketing, Ponzi schemes, or betting.
Learn to ignore people who promote get-rich-quick schemes that build wealth just by working three hours a week. Sustainable wealth comes from creating value over the long term. If you are not creating intrinsic value and earning income from that good or service, it’s truly impossible to build sustainable wealth.
So get a good job if you don’t have one and keep your job if you do have one.
If you are a small business owner, continue to focus on creating more long-term value
3. Create a budget
Creating a budget and sticking to it is crucial if you want to know how to build wealth from nothing. Using that regular income source we just spoke of, now you need to create a budget to take control of how you are spending your money, usually set on a monthly basis.
A budget is a financial plan for a defined period that contains estimated income and expenditures for that period. Every household and/or individual needs to create at least a monthly budget to identify your expected income and estimated expenditure. Living without a proper budget is like sailing without a compass, and you can guarantee that you’ll get lost in the seas of financial missteps.
A popular budgeting technique is the 50:30:20 rule. In this technique, you can formulate a budget where 50% of income goes to essential expenses (rent, mortgage, food, healthcare), 30% to non-essentials like shopping, vacation, entertainment, and 20% to savings and investments.
Why is budgeting important?
One main reason is that by understanding how you spend your money, it’s easier to identify the things that can be cut: the lower your expenses, the more you can add to your savings and investments.
By identifying and cutting unnecessary and avoidable costs, you can build wealth faster. It’s that simple
4. Have enough insurance (but don’t over insure)
One core item you should have on your budget is insurance. Insuring yourself and your main assets (properties, cars, etc.) prevents you from incurring massive losses in the case of undesirable events.
At the minimum, you should have health insurance, so you don’t break the bank in the unfortunate event of a costly disease. If you don’t have one, research and compare health insurance plans and choose the one that is best for you.
If you own your home and a car, consider homeowner and auto insurance. Also, if you have kids and dependent relatives, consider subscribing to term life insurance.
Building wealth is good, but it will be excruciating if you lose your wealth to unforeseen circumstances and events. So be proactive and insure the things that are most valuable to you. However, don’t over insure. There are many insurance products out there that are useless. Stick to the four above, unless there is an absolutely good reason to get more.
5. Practice “extreme” savings from your income
While the 50:30:20 rule is a good place to start, you’ll find that you can save a lot more if you put in the effort.
Once you are committed to building wealth, there will be many items in your budget that you can reduce or cut. You won’t be alone in doing so. Today there is no shortage of communities that promote ways to practice “extreme” savings.
The “Financial Independence, Retire Early” movement, known as FIRE, is among the most popular. They promote “extreme” savings strategies that encourage adherents to save a huge percentage of their monthly income.
Below are some simple ways to reduce your expenses and save more money:
• Cook at home as much as possible and buy your groceries in bulk
• Reduce restaurant budget and use filters on food delivery apps to take advantage of various discounts
• Increase your room temperature by 1 degree to reduce utility bills
• Choose a DIY workout program
• Buy one-off items like computers, refrigerators, and TVs at GITEX or Shopping Festivals
• If your rent is more than 30% of your income, renegotiate your rent or find better offers.
• Renegotiate the interest on your mortgage
Apply these tips to increase your investable cash beyond the standard 20% of your income.
Remember, it is not about how much you make but how much you keep.
6. Build an emergency fund
Now that you have learned how to save a significant part of your income, the next course of action to build wealth from nothing is to create an emergency fund.
An emergency fund is like self-funded insurance. It’s money you set aside for unexpected expenses like car repairs and unforeseen circumstances like job loss or pandemic-induced lockdowns. When unexpected expenses and unforeseen circumstances arise, there are ways to make matters worse: incur debt and/or sell your investment(s). You pay interest on debt, and when you sell your investment(s), you lose both the amount you sold and the interest from the market exposure it could have earned if you didn’t sell.
Therefore, to avoid those two scenarios, we recommend you learn how to start an emergency fund right away. An emergency fund should hold between three to six months of your monthly expenses. Also, ensure those funds are in a savings account where you can easily access them when the need arises.
Like insurance, an emergency fund won’t make you wealthy, but it will prevent you from selling your investments or incurring debt during emergencies.
7. Improve your skill set
There are two ways to increase your savings and investments, lower your expenses or grow your income. While many financial advisors focus on the former, the latter deserves its fair share of attention.
If you are an employee, improve your skill set by taking professional courses and immersing yourself in continuous career development. By improving your skills (both hard and soft), you can earn promotions or get better job offers from other companies, which means higher income.
If you own a small business, improve your understanding of the market, commit more resources to innovation, and provide more value to your customers. By doing this, you can increase your market share and earn more revenue.
8. Explore passive income ideas
In addition to increasing the income from your job or business, you should be exploring various opportunities to earn passive income. Passive income describes income you generate that does not require your continuous presence or labour, unlike your job or business.
Passive income is crucial for those of us learning how to build wealth from nothing. If you don’t find a way to make money while you sleep, you will work until you die.
There are two types of passive income, investment passive income (your money does all the work) and non-investment passive income (you do some work on the side). Since the next section focuses on the former, we’ll stick with the latter right here.
In today’s global and digital economy, there are many opportunities to earn money on the side. However, while exploring these opportunities, be wary of get-rich-quick proposals such as Ponzi schemes and betting sites.
Some reliable and proven passive income ideas include:
• Selling digital products: If you are an expert in a niche, create digital products, books, video courses, email courses, or paid webinars, on topics that interest people. The advantage of digital products is that you only need to create them once (except for later updates). The single product you make can keep generating income for a long time.
• Blogging: Instead of selling your idea as a digital product, you can do it through a series of regular blog posts. Once you generate sufficient traffic on your blog, you can monetise it through Google AdSense, digital products, paid membership, sponsorships, guest posts, among others.
• Affiliate marketing: Instead of selling your digital products on your blog, you can sell other merchants’ products and earn a commission for every sale. Affiliate marketing removes the need to create your own product.
• Drop shipping: With drop shipping, you sell the products of various merchants without taking stock of those products yourself. Consumers place an order with you, and you process that order with the producer, who then delivers to the customer. The difference between the retail price (the customer pays) and the purchase price (you pay to the merchant) is your income.

9. Embrace passive investing
To build wealth, you need to save and then invest. If you have followed the above steps, you are now saving at least 20% of your income and earning more income through other side hustles.
Now is the time to combine the two and start seriously investing.
Without exception, all of the millionaires that you know and admire built their fortunes through wise and profitable investments on the stock market. If you don’t make money to do the work, you will have to do it instead. The problem is that your ability to earn money is limited, and you can’t earn money while you sleep.
But investing your money in the market means that money is working for you and you are profiting from the labours of others.
So what are the best ways to turn your money into sustainable wealth?
First, putting your money in a savings account is not an investment. The only money you should leave there is your emergency fund. Apart from that, your money should be in profitable investments that earn good returns while minimising risk.
Money in savings accounts earns low-interest rates (less than 1% APR in most cases), and can depreciate when the inflation rate exceeds the interest rate on your savings.
Second, timing the market is not a good strategy. It is best to nurture a long-term perspective to investing rather than a short-term obsession with market movements. The good news is that the market rises more than it falls (74% to 26%), and long-term investors are almost always guaranteed to win.
Third, because market timing is not the best way to grow long-term wealth, embrace passive investing rather than active investing, especially when it comes to the bulk of your savings!
The active vs. passive investing debate is an old one. However, more investors are recognizing the benefits of passive investing. Furthermore, passively managed funds now exceed their actively traded counterparts.
10. Use a robot-advisor
How do you create and manage your portfolio of investments?
When they start investing, investors have to decide how to create a portfolio of stock ETFs, bond ETFs, and REIT ETFs. How many should they buy and at what time? Which ETFs should they choose first? All of this can be confusing for new investors.
However, with the rise of robot-advisors, investors can now easily automate their investments in a pre-built diversified portfolio of ETFs that matches their risk tolerance.
If you have ever wondered how to build wealth from nothing, understand that it is not rocket science. You can do it. Just focus on:
• Educating yourself about money
• Getting a stable income and earning passive income on the side
• Minimizing your expenses so you can save more money
• Protecting your money with insurance and emergency fund
• Passively investing your savings in stock ETFs, bond ETFs, and REITs ETFs
• Automating your investments in a diversified portfolio with a Robo-advisor

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