Can anyone become wealthy? Technically the answer is yes, no matter your financial circumstances, knowing a few money secrets will help you understand wealth creation in a better light.
If you want to build wealth you must have a certain mindset. You must think about money in a certain way.
And because this thinking doesn’t come naturally to most of us, it’s not necessarily easy for everyone to replicate. It’s the primary reason why some people are wealthy, and some are not.
The key to success then lies in your ability to bust out of your current way of thinking about money and learning to embrace a new mindset.
Most of us have never heard or been exposed to someone who thinks in the ways I’m going to share with you today. These are the money secrets only some people know.
We definitely were not taught these mindset strategies in school and most our parents didn’t learn them either.
In essence, nobody was talking about them.
What we were taught was to go to school, then head to college so you can ensure you land a great job that allows you to move up the ladder and continue to increase your earnings. This way you’d make enough money to have the American Dream and support your family.
The problem is this type of trajectory for many of us didn’t allow us to build wealth. It just enabled us to make a living albeit a decent one for many.
This is the traditional way of thinking about money: work hard, get a good education and land a nice job so you can have the things you want. Eventually, if you work hard enough and save enough, you’ll be able to retire someday and move to Florida.
This type of thinking is about trading dollars for hours. Time for money.
But here’s the problem: There’s only so much time in a day, and even if you worked non-stop from dusk to dawn there would always be a cap on your income because there are only so many hours in a day.
But making money in this fashion is only one way to receive income, and it’s known as active or earned income. There are other ways to make money work for you instead of you always working for money.
13 MONEY SECRETS NOBODY EVER TOLD YOU
I’ve read countless books on wealth creation, business building and passive income over the last several years. Most if not all of these books changed the way in which I looked at making a living and building wealth.
When I owned my cleaning business and was working 40-60 hours a week cleaning, I was constantly trading dollars for hours. It wasn’t until I hired people to work for my company did I start creating and building my business and creating a wealth structure.
You might be wondering how this might apply to your situation. Well, it might not, or you might see something valuable here that could completely change your financial situation. At any rate, you’ll start to see money differently after I share the 13 secrets.
KNOW THE DIFFERENCE
This money secret is the first to focus on. Do you know the difference between budgeting and net worth? No worries because I’m going to explain it to you now. Budgeting is when you look at what’s coming in and what’s going out and ensure it matches or at the very least you have enough money to cover all your expenses each month. Budgeting is a critical tool in working toward wealth. If you don’t have money left over at the end of the month to invest, or put away, then you’ll never be able to build wealth.
Net worth, on the other hand, measures your assets against your liabilities. It’s your financial barometer of health. If you have more liabilities than you have assets your net worth is not healthy. The goal is to have more assets than liabilities and to increase these over time.
KNOW YOUR STORY
We all have a money story. It’s the story that was given to us by our parents or significant people in our lives about money. The problem is most of us learned a story that never empowered us to take control over our financial situation. We have negative beliefs that hold us back and make it difficult if not impossible to build wealth. The good news, you can change your story, reduce or eliminate your debt and develop the habits of people who are debt free.
HOW YOU DO MONEY IS HOW YOU DO EVERYTHING
Money is a reflection of you and your current circumstances. If you want to improve your financial situation, you must start with working on yourself and cleaning up the issues that are holding you back from creating your best life.
Here are a couple of posts that can help you in this area:
DON’T RELY ON ONE SOURCE OF INCOME
No matter who you are, it’s hard to get ahead in life if you’re relying on one source of active income. If you’re serious about broadening your horizons and increasing your income, you’ll want to look at ways you can earn more money.
It’s like the saying, ‘don’t’ put all your eggs in one basket.’ That applies to how you earn a living too.
DON’T BECOME DEPENDENT
Relying on one source of income means you’re of dependent on that single source of money. It’s far better to diversify your income streams or to create multiple streams of income. For example, when I built my cleaning business and was able to step away from the day to day cleaning tasks I was left with time to build up my coaching business and began to see my income streams more diversified. If I had lost a cleaning contract, I had another business I could turn to make additional revenue.
READ, READ, READ
If you want to learn how to create wealth and look at money differently you need to educate yourself as much as possible.
Mary Beth Storjohann is a CFP® whose writing makes personal finance easy to understand. Her book, “Work Your Wealth: 9 Steps to Making Smarter Choices With Your Money” is a straightforward guide to whip your finances into shape.
Ramit Sethi’s book, “I Will Teach You to Be Rich,” offers a six-week personal finance program for 20-35-year-olds. This book makes it easy to make big changes in your life, and I like that he focuses more on earning more, rather than slashing all your expenses although sometimes slashing is advisable.
Dave Ramsey’s “The Total Money Makeover,” is THE go to guide for helping you gain control over your debt. He helps you to see how detrimental debt is to your future and points you in the right direction. A must read!
There are three types of income. Active Income is where you’re trading dollars for hours. Portfolio Income is where you make money from investing in the stock market. Finally, Passive Income is when you make money from a business or real estate. All three types of earnings are taxed differently.
THE CREAM OF THE CROP
Passive and Portfolio Income are the best income producing types because they allow wealth building, they’re taxed more favorably than Active Income and they’re not contingent on trading dollars for hours.
Real estate when used as a rental property is considered an asset. Buying a home with a 15 or 30-year mortgage for your own personal use is only an asset once you’ve built equity in the property. This takes time depending on the market, and as we’ve seen in the past you can lose all your equity in a flash if the market takes a turn for the worse. Of course, once your home is paid in full it then becomes an asset.
If you have money in a 401K or 403 B plan or another type of investment tool, you’re essentially investing in the stock market, and your portfolio is earning income. This is most commonly done in your retirement accounts. Investing is one the most common and popular ways to build wealth. If you have a retirement benefit where your employer is providing some matching funds and you’re not taking advantage of it, go sign up for it asap! This is one way to start building wealth.
A business is considered an asset because it’s earning revenue usually in the form of Passive Income but sometimes in the form of Active Income. Let’s take my blog as an example. My blog is a business. It creates passive income for me. My first full year blogging (2015), I made $48,000. are was while I was still managing the cleaning business and taking care of my elderly mother who was dying. I only worked about 15 hours a week.
So if you’re stuck and need to make extra money, starting a blog might be a worthwhile endeavor for you. Of course, taking Elite Blog Academy was instrumental in pushing the numbers even higher the next year.
BE IN THE POSTIVE
To effectively build wealth, you must have a positive net worth. This means your assets are worth more than your liabilities or debt. So if you have credit card debt, student loan debt or a super high mortgage, it’s going to be much harder for you to build wealth until you get rid of those liabilities. Start with your credit card debt and student loan debt first and the work at lowering your mortgage. You can still have a mortgage and build wealth but not if it’s eating a majority of your income.
If you don’t have a financial advisor, go get one. But, chose carefully. Make several appointments and interview them all. Learn all you can about money so you can have an educated conversation with your advisor and know she is pointing you in the right direction.
Learning about money doesn’t need to scare you. It’s not as complicated as you might be thinking. Start by getting one of those books and commit to reading just one. Pretty soon you’ll find yourself so intrigued with the concepts in these books you’ll keep learning more and more.
Second, if you don’t have a budget, please create one! Sign up above for the Debt Free Money Guide and get my budgeting tools to go along with it!
Lastly, get my weekly emails so you can keep money on the top of your mind. And, join our supportive Facebook Group where we discuss money issues and support one another on our financial journey.
I’ve learned a lot about money since in the fifteen years since I got a foreclosure notice on my home. Today my life is much different because I took the time to learn the ins and outs of money. These money secrets opened up a door for me and I haven’t looked back since. Are you ready to open the door? I know you can do it!
MY FAVORITE MONEY-SAVING TOOLS
EBATES: Want to earn cash back when you shop online? Ebates acts as a shopping portal offering coupons and cashback from over 2,000 online stores. I always check on Ebates first whenever I shop online! You can join Ebates for free and get a $10 welcome bonus when you sign up through this link.
DIGIT: Like the idea of saving but need something automatic? Digit is the perfect solution if trying to automate your savings strategy. In essence, what Digit does is use an algorithm to detect spare money and then transfers it to a secure savings account – so you’ll always have something to fall back on. Sign up for free!
GROCERY BUDGET MAKEOVER: Is your grocery budget giving you a serious kick in your families spending plan? Grocery Budget Makeover helped my family slash $6,000 a year from our food bill! Learn more about how Grocery Budget Makeover can help you save money too!