Success

How Young Adults Can Build Wealth

build wealth

Building wealth is not an easy task. It is something that often takes years to build. There is a difference between being wealthy and being rich. I think I remember Chris Rock putting it best.

Chris Rock says

Shaq is rich.
The white man who signs his check … is wealthy. “Ah, here you go, Shaq. Go buy yourself a bouncing car. Bling, bling!”

I remember laughing when I first heard that joke. Then I started to think about the difference. Rich is generating active income. I know several people who I thought were rich, but once the recession hit and they lost their ability to generate income, they quickly became not so rich. Someone who is wealthy generates passive income. Their income is not dependent on business cycles or a booming economy. They earn from compounding interest, intellectual property, businesses and leverage.

How to Gain Wealth

building wealth

I started learning how to gain wealth so that I could leave my children the freedom of choice. I want them to be free to go to whatever college they want and not be restricted by the costs. I learned that there are four major avenues to building wealth.

Ways to Save Money

The first method to building wealth is saving money. I don’t mean save a little here and there, I mean really putting away at least ten percent of your income. Then don’t just stick it under your mattress or in a barely earning interest CD. The best way to save money is to make it automatic. Set up an automatic transfer from your checking account each month or biweekly then get ready to spend. Save by sharing one car, for example. Little bits add up quickly.

Learn to Invest Money

I like to look at investing as spending because it makes it more fun for me. I like to buy pieces of companies each month. Start with basic investing and keep it simple. Read the information that you’ll find at reputable news sources and stay up to date with what is going on in the investing world.

Learn to Budget Your Money

It has often been said that it’s not how much you make, it’s how much you keep. Budgeting is the difference that sets apart the winners and the losers. I’ve had the benefit of speaking with a wealthy business owner who put everything in perspective for me. I often saw him buying nice things and he even has a beautiful home in Beverly Hills. When I asked him his opinion about extravagant spending, he mentioned percentages. Here’s a simple example of what he told me. If you make 1000 dollars, then spending 500 dollars on shoes is ridiculous. However, if you make 1 million dollars, spending 500 dollars on shoes is not so bad. It’s the difference in percentage that counts.

Make More Money

So what if you are having a hard time getting started? You know what to do, but you just don’t have the cash to do it? There are a few ways that you can make more money. If you don’t have much to start, you can start a blog for free. If you don’t have much to start, you can start a blog for free. Start writing about something people want to read about and soon you will be able to make money online with advertisements and such. You can also learn how to write a business plan and start your own company. You can find investors that are willing to benefit from your idea and labor and invest cash to get you started. You can also maximize your career by getting a more profitable degree and generating cash so that you can save, budget and invest.

As a young adult, you have the benefit of time on your side. Get a head start by saving money now and learning to invest what you have. With time, you will begin to build a sturdy foundation for wealth that can be passed down from generation to generation.

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  • http://rajesh.junk@gmail.com Money Cone

    Ah Chris Rock! I’m a die hard fan! I remember that one – was it ‘Bigger and Blacker’ or ‘Bring the Pain’? I’m sure it was one of those two!

    “As a young adult, you have the benefit of time on your side.” So true! Power of compounding works magic!

    • http://www.FSYAonline.com LaTisha

      I think it was Bigger and Blacker, one of his best for sure

  • http://barbarafriedbergpersonalfinance.com Barb Friedberg

    Hi Latisha, I have to differ a bit as I think Shaq is wealthy too :) But I get the joke. You want to be in control of your own financial future. Your headings were very informative.

    • http://www.FSYAonline.com LaTisha

      Thanks, yeah I’d say by now Shaq is definitely not in need.

  • http://www.moneyreasons.com Money Reasons

    You and I have some of the same wealth drivers! I have a greater focus on building wealth too now that I have to worry about college costs for my kids.

    I’m socking money away into a 529 plan, and really really really hoping for some scholarships!!! :)

    • http://www.FSYAonline.com LaTisha

      That’s something I’m already thinking about even though I don’t have kids yet. I just know that I wanted to go to an out of state school but couldn’t afford it. I want my kids to be able to choose where ever they want to go.

  • http://www.101centavos.com 101 Centavos

    Young adults are the group both most in need of this advice, and most likely to benefit, since as you say, time is indeed on their side.

  • Investor Bees

    saving money is important as every money saved is like earning money.
    The biggest mistake every young adult do is they do not invest and diversify their portfolio. so the external factor like inflation in such scenario will reduce your wealth.
    so stop just stacking money in your saving account, and start investing (if needed with proper advice).

    • http://www.FSYAonline.com LaTisha

      That is so true! I see putting money in a savings account as similar to sticking it under the mattress. What a waste of time!

  • http://frugalstudents.blogspot.com/ Ginger

    I agree that young people should be saving/investing but 10% is not enough. That was enough, for men, when you included social security. Even back when the experts recommended 10%, many recommended 12.5-15% for women because women live longer. Now that our generation probably cannot rely on social security I think we should be save at least 20% for retirement and about 10% post tax for emergencies/moves/ extra investments. I am sure most young people cannot afford that right now, but I think it is the goal to work towards.

    • http://www.FSYAonline.com FinancialSuccessforYoungAdults

      Have you heard of the Saved Quarter Challenge? Penny actually suggests saving 25% of your income. I think it’s definitely doable especially if you budget what you have now and save any raise or extra income that may come your way.

  • http://YoungAdultFinances.com FinancialSuccessforYoungAdults

    Have you heard of the Saved Quarter Challenge? Penny actually suggests saving 25% of your income. I think it’s definitely doable especially if you budget what you have now and save any raise or extra income that may come your way.

  • RichUncle EL

    Nice Post I think with the volatility in the markets people are scared or mis-informed on how to save money, so they just do not do much to save. I like the thinking behind spending by percentages because it can help anybody put things into perspective. The biggest issue we have in America is car expenses, only here can somebody making 30 grand buy a 30 grand BMW and say hey I only have one life. That’s 100% of your annual income, wake up people.

    • http://YoungFinances.com/ LaTisha Styles

      True. The wealthy think in terms of net worth. I think that’s the main difference. If a car is 100% of your salary then you are not thinking wealthy.

  • RichUncle EL

    Nice Post I think with the volatility in the markets people are scared or mis-informed on how to save money, so they just do not do much to save. I like the thinking behind spending by percentages because it can help anybody put things into perspective. The biggest issue we have in America is car expenses, only here can somebody making 30 grand buy a 30 grand BMW and say hey I only have one life. That’s 100% of your annual income, wake up people.

  • http://twitter.com/RFIndependence Pauline

    10% is a good place to start, although you should increase that a bit every month, or every quarter, until you really can’t do more. You are right that with time on your side, being young is a plus, but you have to really make time work for you.

    • http://YoungFinances.com/ LaTisha Styles

      Personally, I’m looking to increase my savings up to 25% but for most people just starting with 10% is a rough start. By putting the habit of saving in place now, going up to a higher savings rate won’t be so hard in the future.

  • http://reachfinancialindependence.com/ Pauline @RFIndependence

    10% is a good place to start, although you should increase that a bit every month, or every quarter, until you really can’t do more. You are right that with time on your side, being young is a plus, but you have to really make time work for you.

    • http://YoungFinances.com/ LaTisha Styles

      Personally, I’m looking to increase my savings up to 25% but for most people just starting with 10% is a rough start. By putting the habit of saving in place now, going up to a higher savings rate won’t be so hard in the future.

  • Mo cdnbudgetbinder

    Good Point about the percentages. So what one perceives is a lot of money another might not depending on income thus percentages. Great post… Cheers Mr.CBB

    • http://YoungFinances.com/ LaTisha Styles

      Thanks!

  • Emily

    Great tips!

  • My Wealth Desire

    That is true La Tisha, saving money is the first step to get rich and it is the best foundation of financial success. Actually, one of my favorite books of personal finance “The Next Door Millionaire”, it was revealed
    that most millionaires are commonly thrifty, spending less, and regularly saving much money for rainy days, for business capital or for wealth building purpose.

    • http://YoungFinances.com/ LaTisha Styles

      I really like The Millionaire Next Door book also! It’s a great read and it changed the way I thought about how millionaires live. After reading it, I realized that I have a few ‘potential’ millionaire friends and I am not far behind. ;)

    • http://YoungFinances.com/ LaTisha Styles

      I really like The Millionaire Next Door book also! It’s a great read and it changed the way I thought about how millionaires live. After reading it, I realized that I have a few ‘potential’ millionaire friends and I am not far behind. ;)

  • Ted Jenkin

    Money is made in the same supply and demand equation that most of us learned in basic economics. Skills such as marketing (getting new clients), sales, and entrepreneurialsim are the big drivers of making more money. You can’t expect to suck expenses from a company and make a $100k. It just doesn’t work in supply and demand. Saving money is key, but building a modest lifestyle is even more important.

  • http://www.4autoinsurancequote.com/ James Shaffer

    I’m coming up on 28. Got a job right out of college at 23 in a field that is in demand making $60k the first year. I lived close enough to work to go without a car, starting in a studio apartment and moving into a one bedroom when the economy was weak. I started investing right away with my first paycheck starting two months after Lehman Brothers collapsed. I never knew what was going to happen, so i set my budget to live like in was making $30k a year. The result of saving, investing early and keeping my expenses low? My net worth is almost $200k. About $75k was pure luck, but $125k wasn’t. I see a lot of people my age driving cars with borrowed money and stretching to make their payment…do I feel sorry for them? No. A lot of things are out of our control, but if you’ve ever been to China and seen someone who makes $500 a month save half their income you know someone making $40k a year and saying they can’t save a dime, it’s their own fault because part of it is a choice.

    • http://YoungFinances.com/ LaTisha Styles

      Our money, our choice. Very good point.

  • http://squirrelers.com Squirrelers

    Good stuff here, La Tisha. I of course agree with saving and investing, but I also like how you noted making money.

    While I do think that people can do well by living within their means even on an average income, let’s not forget that in order to save money one must actually make it! Thus, making more money can only help.

    As for Shaq, he’s become an NBA mercenary at this point, collecting big bucks at each new stop! I recall hearing years ago early in his career that Shaq lived off endorsements and banked his whole salary (or maybe vice versa). Anyway, he seemed to have a good sense of keeping money. Also heard a story of how he gave someone a $20 tip on a $30 dinner bill, so there’s some generosity there two. Heard these things second hand, so take it in that spirit :)

  • http://www.FSYAonline.com LaTisha

    Thanks! Yeah I think when Chris Rock made that joke Shaq wasn’t such a huge star. I know so many people who have thoughts of becoming wealthy but they can’t seem to get started. So figuring out how to make money is a big deal.

  • Brian

    You are absolutely right that being rich and wealthy are not the same. Like my man Andre 3000 said “wealth is the word, rich is round the corner from the curb.”

    Being able to generate wealth passively and regardless of outside influences is vital to achieving and maintaining financial independence.

  • http://www.FSYAonline.com LaTisha

    I like that quote!

  • http://buckinspire.com Buck Inspire

    Great tips on building wealth. Time is on your side. Way to get a jump on everyone else. Funny Shaq joke. Chris Rock rocks!

  • http://www.FSYAonline.com LaTisha

    Thanks Buck!