Wealth Building Starts With Spending Less Than You Earn

Virtually every one of us wants to be comfortable in life, although comfort does vary from one person to another. But the general rule is to be able to live your life supporting your basic needs without resorting to handouts from anyone.

Therefore this article will teach the simple but basic principle of wealth creation. Simple does not necessarily indicate the steps are easy to understand and follow. Have you noticed that most people do not believe in things that are simple? I know that, because these steps are simple is the reason they are difficult to follow.

Wealth creation or building simply means you keep accumulating wealth consistently over time, or even until time immemorial over and above your expenses. This means day in day out, year in year out, you have some excess after your expenses. Simple logic, but how do you achieve this?

Three Basic Steps To Wealth Building

1. Build Up Your Income

Making money in today's internet age has never been easier. Most can now comfortably make money in the comfort of their own home, some seriously too. I am not advocating all those ''get rich quick scams'' out there. I am rather saying if you apply yourself diligently to online work (there are thousand and one genuine ones out there), there is a huge opportunity to build serious wealth.

This is a different income from savings and investments, which I will treat under passive income. As much as those can sometimes add up, the question is, are you making enough to be able to save in the first instance? To make enough money means you are able to be able to cover your expenses and have some leftovers.

When we accountants talk about incomes, we basically classify incomes into two. Earned and Passive Incomes. Earned incomes are from salaries, professional work, or contracts, either from self-employment or as a result of working for another. This includes tips, bonuses, gratification, etc., associated with the professional work.

Passive income, on the other hand, comes from side hustles and or investments. To earn enough, you must be able to increase these two. Let us discuss how.

First look at your natural talent. Believe it or not, this is the easiest way to make money. Turn your natural talents into a viable skill. This is what designers and artists do. They make money from their talents. You can perfect this skill with further training and education. The better you are at your talent, the more people are willing to pay for your service.

Look at what you enjoy doing. What you enjoy doing comes so naturally to you, you don't even think or look at it as work. Most successes come from what people enjoy doing.

Then look at the best route to combine what you enjoy and your natural talent to earn a living. This can include many, including learning, training, partnership, apprenticeship, etc. It is a good practice to review and evaluate your income streams at least twice a year.

2. Reduce Your Expenses

This is a surer way to increase your overall wealth to reduce your expenses. Look at those wants are not necessary. We all do it, and a new iPhone is out. The latest gadgets are the number one items that drain our money. I have a policy, ''If it doesn't break, then don't fix it.''

You should monitor how you spend money on your passion and recreation to ensure it does not bother on excesses. Most people spend unimaginable amounts on coffee houses without thinking much about it. They use their cards, so it is not real cash going out of their wallet. But it all adds up.

''Watch your pennies, and the pounds will take care of themselves'' Benjamin Franklin

Are you able to settle some bills by direct debits? Here in the UK, you can get a discount if you opt to settle your bills by direct debits, and some banks even give you cash-back for using them to do it. This can give you a sizeable discount at the end of the year.

3. Invest Your Savings Wisely

Here we are assuming you have extra left to save from the two actions above. The extra should then be invested wisely to give you a good passive income. Passive income comes from investment income like dividends, bonds, rental properties, royalties, affiliate marketing, etc.

The best investment portfolio is the one that is spread across boards, that is highly diversified. This means a loss is easily cushioned by other gains. It is possible to suffer a loss, especially in a period of recession. However, your investment portfolio should be profitable at the end of your accounting year. Again, it is important to review your investment portfolio from time to time in accordance with the news from the Financial sectors, which are forever changing.

The Takeaways

Wealth Creation involves regular and steady excess of income over your expenses. The secret is to increase your income and reduce expenditure.

Any excess is then saved and invested to generate further income, called passive income. This is getting your money to work more smartly.

It is important to regularly update your talents and skills to reflect today's changing market if you want to serve your clients competitively.

"Success in life depends upon happiness, and happiness is found in no other way than through SERVICE that is rendered in a spirit of love." Napoleon Hill"

Success in anything, including wealth building, involves consistency and perseverance. Perseverance means continuous persistence in the course of action, a purpose, in spite of difficulties, obstacles, or discouragement.

While I will not condemn outright the 'LAW OF ATTRACTION' to create wealth, I am in support of what H.W. Charles in his book, The Money Code:

"Many people have got caught up in the belief known as the "Law of Attraction." They believe that by their thoughts, affirmations, and other "attraction" exercises they will become wealthy. However, the Tanakh wisely says, "In all work there is profit, but mere talk produces only poverty." Only through work, it is possible to produce results that create wealth and simply talking about wealth will not produce any results. The idea that wealth can come through thoughts or affirmations is a fantasy. "A hard worker has plenty of food, but a person who chases fantasies ends up in poverty."

And wealth creation IS NOT definitely through winning big in a lottery.

About The Author

Lanu Pitan is a Nigerian ex-pat living in the United Kingdom. She is a Chartered Accountant for many years before she retired as a Group Head Finance of a Publicly quoted Insurance Company. She now manages her own small operation.