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Timeless Important Principles To Building Wealth - Part 1

Updated: Jun 20, 2023

1) Start Young

(Image from My Stock Market Basics)

Traditionally, Asian parents would tell their children to study hard, get a good job that pays well, so next time their children will enjoy a good life. Although our parents mean well for us but what they don’t cultivate is to start investing young.

The picture above shows very clearly that if a person were to start investing later life, the end results will be significantly different. In another words, it actually costs us a lot money for those years of delay!

The older person then needs to put in significantly more money into investing to make up the difference. And this can be taxing on the individual especially with other expenses to manage as well. So start early and let the magic of compounding do its job over time!

2) The Wealth Formula: Wealth = (Income - Expenses) x Invest

The more we can invest, the more it will compound over time. A 1% growth of $10,000 is $100, while a 1% growth of $1,000,000 is $10,000.

The “wealth formula” works by subtracting expenses from income and investing the rest. This means if we can increase our income and lower our expenses, we would have more money set aside for investment and grow that money!

An even wiser move would be to set aside an amount to invest first, then manage their expenses with whatever that is left. This way, they will always be able to cap their expenses.

3) Additional Streams of Income

Besides lowering our expenses, we can also increase our overall income. Consider exploring doing side hustles to generate additional streams of income. This, not only can increase your overall income, but also able to protect you from total income loss due to an unforeseen loss of your job. With an increased in income, you can have more money to invest.

4) High Income Does Not Equate to High Lifestyle

A common phenomenon is when a person's income increases, the lifestyle also inflates. Actually, it would be good if the lifestyle does not inflate too much as the income growth. If you keep spending most of your income every month, then you might not have much to invest. So no matter how high your income is, you will find yourself to be very dependent on your job that feeds that inflated lifestyle. This can be very dangerous if you were to suddenly lose your job. So learn to curb your lifestyle expenses – differentiate your “needs” from “wants” and plan your expenses accordingly.

In conclusion, building wealth is about making wise money management decisions and a series of planned moves, that eventually becomes habitual. Hopefully this article has provided you with many insights on the strategies to build your wealth. Check out Part 2 as there is even more to share!

Join Our BOS Community

In the Buffett Online School, we believe in learning the right investing mindset and system, so we can start cultivating emotional detachment and grow our wealth safely and substantially in the long run.

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Remember, you have the choice to cultivate the right investing mindset and unlock your potential to build wealth through intelligent investing. Together, we can create a network of educated investors who make informed decisions and contribute to their financial well-being! Join the BOS Community Today!

In the meantime, feel free to check out some of our blog posts to continue your learning. You can also join our BOS Telegram channel for more investing insights.

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