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7 Things That Will Help You Go From Poverty To Wealth

by Florin 3 months ago in personal finance
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Did you know that the richest one percent of the world's population owns half of the world's wealth, while the richest ten own 85 percent? What's fascinating about these wealthy individuals is that they are aware of things that poor people are unaware of.

1. Having a single source of income

You should never rely solely on one source of revenue.

One of the most significant differences between the rich and the poor is that the majority of the poor rely on a single source of income, whereas the wealthy do not. The traditional path most people take to make money is to go to school, get a good job, and work for several years before retiring and relying on their pension.

However, many people would agree with me that this method of making money is quickly becoming unsustainable, so having multiple sources of income is more important than ever. First and foremost, job security no longer exists. Because of the rapid rate of technological advancement, more and more jobs are becoming obsolete, and new industries are emerging that may not require human labour. Take, for example, how cars are now manufactured.

Whereas people used to work on all parts of the assembly line, many of these roles are now performed by robots who can do the work faster and more precisely. Another reason you shouldn't rely on a single source of income is that unexpected economic events are common. I believe that even if your job was not affected by recent events such as the pandemic or civil unrest, you may know someone who was.

Most people who rely on a single source of income found themselves scrambling for work when these economic downturns occurred. They spent their time struggling to make rent, worrying about putting food on the table, and the list goes on. Now imagine if these people had more than one source of income.

They would have had something to fall back on. One of the world's wealthiest people, Warren Buffett, once advised that no one should rely on a single source of income.

I would recommend that you begin looking for ways to generate multiple sources of income, with a minimum of three or more. For me, the simplest way to overcome the one income problem was to start freelancing. I could work on my own time and earn much more per hour than I did at my nine to five job. By doing so, I was able to add an extra couple thousand dollars to my monthly income, allowing me to save and invest more while also significantly reducing my debt.

Photo by Towfiqu barbhuiya on Unsplash2. Investing is a good way to save money.

is better saving and investing are both financially advantageous, but you must understand that they are not the same thing. Savings refers to putting money aside for future expenses, whereas investing refers to purchasing assets with the potential to increase in value in the hopes of making more money. Saving money is generally risk-free, which is why the poor tend to save more than they invest because they are struggling to make ends meet and want to make the most of every dollar they earn.

However, the rich know better and use this knowledge to their advantage, so if you want to go from poor to rich, you must understand that saving money is good but investing is better. Saving money makes sense, especially when you need money quickly. It is usually easier to access money that has been saved rather than money that has been invested.

Another reason to save money is that it protects you against financial emergencies and helps you avoid debts. Saving money is also important because you cannot invest without it. However, one of the major drawbacks of focusing solely on saving money is inflation. Sure, you've heard the term inflation before, but do you really understand what it means in terms of economics? Inflation is a general increase in the price of goods and services over time.

This means that an item you could buy for a dollar last year has increased in price. Unfortunately, the average interest rate on your savings account is typically less than the rate of inflation, so your savings will erode over time due to inflation, whereas the rate of return on investment can easily exceed the rate of inflation.

The average annual return of the SP 500 index has been between 9% and 10%, implying that investing is a better way to beat inflation and grow your wealth over time. The good news is that you don't need a lot of money to get started; some investing apps online allow you to buy fractional shares of your favourite company for as little as a hundred dollars, and sometimes even less.

Photo by Joshua Mayo on Unsplash3. The greater the value you provide, the more money you will earn.

Another financial principle you should understand and apply is that the more value you provide, the more money you make. This is why different people may work in the same organisation but not earn the same amount of money. For example, the ceo of a company would earn more money than the janitor of the same company.

Top positions such as the ceo role require advanced skills and a large amount of money. Once you realise that value equals income, you'll want to find as many distribution channels as possible.

4. Debt Isn't Always Bad

I know we all despise debt, but if you want to go from being poor to being wealthy, you must understand that not all debt is bad. There are books and entire television shows dedicated to teaching people about the disadvantages of debt, but you can use it to make money. Hopefully, after watching this video, you'll learn to leverage the power of debt.

When debt is used to finance liabilities, it is considered bad debt; however, when debt is used to leverage your returns by investing in money-producing assets, it is considered good debt. For example, marginal investing allows you to buy more stock than you could with your money; if you have a thousand dollars in your account, you may be able to leverage up and buy more stock with marginal investing. Another way to make money with debt is to buy a rental property and finance it with a mortgage loan.

Depending on the location and type of property, you may be able to finance a property with the rents you collect from tenants and start making money right away.

5. It Takes The Same Effort To Earn 50k As It Does To Earn 500 dollars

Most people would consider fifty thousand dollars per year a decent income provided they are debt-free, but what they don't realise is that it takes the same effort to earn fifty thousand dollars as it does to earn five hundred thousand dollars in the first instance you earn that amount by working for others, but you can increase your income by setting up a system where you can earn more.

Because he's created a system that makes him more efficient than the first person, the second person would obviously make more money with the same amount of effort.

6. Increasing your earnings and then cutting your spending will always result in more savings.

If you've ever looked for a way to save more money, you've probably heard that you need to cut your spending in order to do so. However, if you want to go from poor to rich, you must understand that increasing your earnings and cutting your spending will always save you more.

Consider it. How much money have you been able to save simply by reducing how much you spend without earning more money? There's only so much you can do by reducing your spending; there are some basic needs that you can't do without. So how do you save more money when you've reduced your spending to the bare minimum? The answer is to increase your earnings. Fortunately, there are numerous ways to increase your income, such as requesting a raise at work or obtaining a promotion. Starting a side hustle or freelancing, to name a few options, will always provide you with more opportunities to increase your savings potential.

7. If you can't make money while you sleep, you'll always be poor.

Finally, you must understand that if you can't make money while you sleep, you will always be poor. Making money while you sleep simply means having a source of passive income. Passive income is a type of income that requires little to no effort from you to make money, though you may need to do some upfront work.

For example, if you want to publish a book, you will need to spend some time writing it or hire a writer to do the job for you, but whenever someone needs it, you will be People from all over the world can buy your book at any time, and all you have to do is watch your money grow. There's a saying that knowledge is power, so apply what you've learned.

personal finance

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Florin

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