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What You Need to Do to Grow Wealth

Updated on April 18, 2017
Dreamworker profile image

Dreamworker believes that every human being deserves the right to be able to live to his or her full potential.

There are 6 ways that people increase wealth so that they can put their money to work for them:

  • work,
  • inherit,
  • win,
  • budget,
  • save and
  • invest.

Those who do best in life combine several of these methods rather than just depending on one of them.

Unfortunately, we live in a society that encourages instant gratification. Thus properly using the money we take in can be difficult. For some, it is impossible.

Learning how to make money work for you will help you to achieve financial freedom.
Learning how to make money work for you will help you to achieve financial freedom. | Source

Work

The way most people earn is through working, but how much they take in depends largely on the marketability of their skills.

This is why training and education are so important.

The formula is quite simple. The more you know the more you are likely to be able to find a job that pays well and allows you to grow your wealth!

Inherit

Some people don't have to work for their money because they inherit it.

If it is a large enough amount, they may never have to work.

However, the danger here is that if they don't learn how to manage their wealth, they can lose it. For this reason they need to make sure that they, or someone they employ, knows how to put their money to work for them so that they can gain rather than lose.

Win

Another way people gain wealth is to win money.

There are numerous ways to do this, but usually it comes from making some sort of gamble. Only a small percentage of people actually win enough money to help them avoid working, but those that do will find themselves in the same position as those who inherit.

They must manage it well or chance losing it.

Budget

No matter how small your income, there are many things you can do to get the most from it.

Doing this requires a great deal of sacrifice, but it also produces extra money that can slowly be stashed away until it starts earning for you.

Saving as little as a dollar a day adds up to $365 dollars a year. This may not seem like much, but in an emergency it can keep you from falling into debt.

Learn How to Make Your Money Work For You Instead of You Working For It

Save and Invest

The best way to grow wealth is to develop a steady habit of saving and investing.

Doing this takes time and a willingness to allow money to grow, but eventually saving and investing lead to a situation where your money starts working for you.

When that happens, your income increases, your investments continue to earn and your life improves significantly.

Pennies turn into hundreds of dollars through the magic of compounding.
Pennies turn into hundreds of dollars through the magic of compounding. | Source

How Saving and Investing Work For You

Compound interest is the basic vehicle by which money grows when you either save or invest it. Here’s a simple example that shows how it works:

  • Let’s say you put $10 per month into a savings account that is earning 5% annually.
  • At the end of the first year, you have saved $120 dollars, and your money has earned $6 in interest. You now have $126.
  • If you use the same strategy the second year, you’ll have $258.30 because you have doubled your investment and added the interest on it for the two years.
  • If you continue doing this for ten years, you’ll have saved $1585, $385 dollars of which will be from interest.

The chart shows you the details, but the point is that for only saving $10 per month over ten years, you can earn $385!

This is money that was earned via your investment, not your sweat.

Clearly, the more you invest, the more you will earn, and the higher the interest rate you are able to negotiate the more money you will make.

This, of course, is a simplified chart due to the fact that you will have to pay taxes on the money you earn by investing it in this way.

How interest on a $10 per month investment compounds at 5% over a 10 year period.
How interest on a $10 per month investment compounds at 5% over a 10 year period. | Source

Avoid Tax Traps

Taxes can take away some of your financial gains, but the good news is that if you don’t want to pay taxes, there are investment vehicles you can use that will allow you to defer or even avoid paying them completely.

By using them, you allow your money to grow tax free for many years.

For example, you can place money into a Certificate Deposit that you will be able to borrow against if an emergency arises, but will grow tax free until you cash it in.

The trick is to learn enough to grow wealth while at the same time protecting your principle.

It’s always best to make sure you get the return of your money instead of just trying to get a return on your money.

Always Make Getting the Return of Your Original Investment Your First Priority.

Eliminate Debt

Borrowing money is a trap that can plague you for life and may even ruin you.

When you start borrowing it means you are living beyond your means.

The more you borrow, the deeper is the financial hole you dig for yourself due to the fact that the interest you pay on your loans will be so high.

Thus,

  • if you have debt you need to eliminate it.
  • If you don't have debt, you need to avoid creating any.

If you spend the money you get, you'll have nothing left.
If you spend the money you get, you'll have nothing left. | Source

Know the Difference Between Needs and Wants

Everybody knows that you have to spend money in order to be able to live. However, the methods you use for doing so can have a major impact on how well you will be able to increase your wealth.

If you learn the difference between wants and needs, it’s easy to determine the best uses for your money.

  • Needs are things you must have in order to survive.
  • Wants are things you would like to have but are not requirements for survival.

It takes relatively little money to take care of your basic needs, so you should focus on them if you want to get ahead in life.

By sacrificing the present in order to have a better future, you can grow your finances to a point where you will eventually be able to fulfill your wants, but it takes self discipline and time to get to that point.

Using a “stupid phone” today translates into being able to own any type of smart phone you want to have in the future!

Avoid Shortcuts

There isn’t a person in this world who wouldn’t want to have a beautiful home, a nice car and enough money to be able to take great vacations, but those things cost money.

  • If you borrow to get them, you'll never own them.
  • If you invest and save as you go along, you can buy all of them for cash one day.

It takes time to build wealth. If you try to take shortcuts, you’ll never have it.

This means you’ll also never have the security and peace of mind that go along with it.

Learning what you need to know about money and then acting on the insights you gain from doing so is the only way to find peace and security in this hard life we live.

It’s never too late to start learning how to grow your wealth.

Do you see the wisdom of saving and investing?

See results

© 2016 Dreamworker

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    • billybuc profile image

      Bill Holland 5 months ago from Olympia, WA

      I started laughing when I read the title. What I know about money is I don't have enough of it. :) Of course, I've never cared too much about it, either, other than having enough for the basics, so that probably explains me not having much. :)

    • Dreamworker profile image
      Author

      Dreamworker 5 months ago

      billybuc: You are SO funny! Thanks for the laugh!

    • Happymommy2520 profile image

      Amy 5 months ago from East Coast

      Great hub. I am a pretty simple person as well. I believe time is more important than money. You have a lot of good points in this article.

    • Dreamworker profile image
      Author

      Dreamworker 5 months ago

      Happymommy2520: Glad you liked it. I really do believe that keeping things simple is the best way to make headway in life with the fewest problems, and this is especially true when it comes to money management! Thanks for stopping by.

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