It’s common for people to chalk up the success of others to pure luck. They think that the only reason some of the wealthiest people on the planet got where they are is pure luck.
Like a roll of dice, things just landed in the right spot and they ended up with unimaginable riches. While there is a ring of truth to it, it’s not the entire truth.
There’s a reason why the world is full of serial entrepreneurs with many stories of wild success attached to their names. Their secret? A deep and intimate understanding of the dynamics that lead to wealth generation.
Let’s explore these below.
1. Reinvent Your Relationship with Money
Most people have an unhealthy relationship with money and time. They are happy to trade their hours for underwhelming rewards if that means a few hundred dollars in savings (Are your goals loftier than this? See our guide to becoming a millionaire here).
You’ll see this pattern repeat time after time. Even in a business, many small to medium business owners hesitate from outsourcing the mundane parts of their life. They think that since they can do it, they should. But the reality is, time is the greatest equalizer in the world. Even the wealthiest and most influential people still get the same 24 hours in a day as everybody else.
From that lens, it becomes clear that the only way to produce extraordinary results is to think and act outside of the ordinary. Just because you can do something on your own doesn’t mean that you should.
Putting It Into Practice
The easiest way to solve this problem is by figuring out an hourly rate target for your time. This is what your time is worth to you. If you work the standard 160 hours and make $8,000 a month, that means your current hourly rate is $50 an hour.
Once you have that figure, you can simply use it as a benchmark to measure the worthiness of any task. For example, if a task is going to take you 5 hours but you could outsource it for $100, you’ll be much better off outsourcing that task and focusing on higher-value areas of your business.
2. Think in Terms of Wealth Ladders
While some people do get lucky and hit the jackpot with their ventures, the overwhelming majority don’t. That’s why you need to be strategic with your pursuit of money and the finer things in life.
A reliable way of climbing the wealth ladder is to start looking at it in terms of a ladder.
At the bottom, you have all the people trading their time for a fixed amount of money. These are your average 9-5 corporate workers whose upside has a hard limit set by their employer. In other words, the rewards they receive are disconnected from the amount of value they generate.
Next on the wealth ladder are specialized practitioners whose income is directly tied to their output. The more work value they generate, the more income they get to take home. For instance, legal and medical practitioners, freelance specialists, and business consultants all fall into this category.
The third step on the wealth ladder is when specialists onboard additional talent to handle the mundane parts of their operations. Instead of continuing as a practitioner, they transition to the role of a manager and business leader. If you analyze some of the most successful agencies out there, you’ll notice that most of them were founded by leaders with years of experience serving in the trenches as specialists.
Finally, you get to the top of the ladder when your income is completely separated from your time investment. We’ll explore this idea in the next step.
Putting It Into Practice
First, you need to figure out where you stand on the wealth ladder. This may bubble up unwanted feelings, but pinpointing your position on the ladder is the first step in advancing to a higher level.
Next, it’s a matter of mapping out a path to the next rung of the wealth ladder. For instance, if you’re working a 9-5 where your rewards have a hard cap as designated by your employment contract, then your ideal next step is to figure out a way to get rewarded for the value you generate.
This usually happens in the form of freelance work, but you can negotiate better results-based rewards with your employer too.
3. Leverage the Single Greatest Wealth Generator of All Time
Investments are the greatest wealth generator of all time. The wealthiest individuals in the history of mankind have always had a great finesse for leveraging their resources to grow their wealth.
If you enter a room full of high net worth individuals and ask them for advice on accumulating wealth, the single most common takeaway would be the need for making your money work for you.Investments add an additional layer between your input and output by acting as a multiplying force. The more you invest, the more your portfolio grows. But if you take those returns and reinvest them into expanding your portfolio, you’ll start experiencing the wonders of compound interest first-hand.
The key is to make your financial outlook completely independent of your professional output. While setting up these investments will take a lot of time and energy, the key is to uncover opportunities where things will be relatively passive once the setup is done.
Putting It Into Action
In the beginning, you should consider playing it safe by parking your capital into a handful of index funds. Even after dedicating all their waking hours to discovering individual opportunities, most investors fail to beat the S&P in annual returns.
That’s why you should consider investing in index funds along with a few other options for some diversity. This way you can have your current assets work for you without taking attention away from your primary source of income.
Over time, however, as your portfolio grows, you’ll be in a much better position to execute more advanced investment deals because you’ll have accumulated the capital for it by then.
The Key Takeaways on Building Wealth
To sum it up, you need to reinvent your relationship with money by knowing what your time is worth and cutting out anything that doesn’t meet that target.
You also need to figure out your position on the wealth ladder and map out a path for your ascend. And finally, you need to make your money work for you by investing in relatively safe options to earn passive returns. This is important because the vast majority of your wealth in the early stages will come from value generation. So that’s exactly what you should dedicate most of your attention and energy towards.