Money Management

The Simple Truth About Building Wealth When You Have None

When you don’t have wealth it seems impossible to get. The truth is that it isn’t hard to develop wealth. The plan is easy to follow. And it doesn’t require anything more than you already have.

My Story

When I was applying to colleges I had a mentor named Steve. Steve was successful in his field. He had done academically well throughout school.

I had never been a super student. I had many interests outside of school, some of which I took very seriously. For better or for worse, I spent more time on my outside interests than I did on my schoolwork. Consequently, my grades could have been quite a bit better.

By the time I was ready to take college seriously I figured I could use all the help I could get. So I visited Steve.

I asked Steve, “What’s the secret to doing well in school?”. His answer was right to the point: “Take easy classes”.

That answer hit me like a ton of bricks. Could it really be that easy? Was that really the secret to Steve’s success?

Now, Steve obviously couldn’t have established himself professionally if he’d only taken “Wine Tasting 101”, or “Beaches and Shorelines”. He had to take the hard classes too. But his point was clear.

The problem I had was that I spread myself too thin. I had taken all advanced placement course in high-school, and had several activities outside of school, each of which required a major time commitment. I was spread too thin.

So how does this apply to personal finance?

Steve’s approach to school was basically to be honest about how smart he was and then use only a portion of those smarts to get through school. If he’d taken all hard classes he probably wouldn’t have done very well. He wouldn’t have had time to handle 4 midterms all at the same time, or write 4 papers all at the same time, in subjects that were difficult for him. And this is basically what happened to me.

By taking easy classes Steve ensured that he would have enough resources to handle the workload, regardless of what came his way.

The secrets to developing wealth are not really secrets.

  1. Save more than you spend.
  2. Earn more when you can.
  3. Spend less when you can.
  4. Earn interest on the wealth you already have.

If you do those four things, over time you’ll be wealthy. Even if you just do the first one, you won’t be living paycheck to paycheck for long.

The biggest reason people without wealth don’t start practicing those four healthy habits is emotion. If they earn a lot they feel as though they should be able to spend a lot. Or they feel that certain aspects of their lifestyle (a nice car, eating at restaurants or expensive clothes) are necessities. Maybe your tastes aren’t so extravagant. Regardless, if you’re stressing about money then you’re doing something wrong. Until you find out what it is you’ll never find a way to reduce that stress.

The simple (and hopefully not too painful) truth about building wealth is that it doesn’t happen by following some complicated process that’s only available to the wealthiest 1% of the population. The secret to building wealth is simply spending less than you earn.

Once you get the basics down, there are some more complicated things you can do to add some extra punch to your wealth-building power; 401Ks, health savings accounts, etc.. But no matter how much money you earn, if you spend more than you earn, you will never be wealthy.

So Take Heart

If you’re stressing about money, wondering why you don’t have any, thinking that things would be so much better if only you had more money coming in, don’t despair. Things can turn around quickly if you’re willing to let go of unhealthy money management habits and change your lifestyle.

It doesn’t matter how much you earn. The key to building wealth is spending less than you earn, saving money to build up an emergency fund, investing once you develop a cushion, and just letting the wealth accumulate.

If you’re willing to make the lifestyle changes to let that simple process happen, then you will be wealthy. Just have faith that it is possible and that you already have everything you need to make it reality.

Laran Evans is a software developer and entrepreneur looking to help ordinary people develop wealth with Plenty, a better personal finance tool.

Comments (13)

  • Smart man Stevo is! I took Golf my senior year in college and it was the best thing ever! Got an A+ too which helped the GPA.

    Handle what you can!

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  • So many things in life are really simple, after all. Nice reminder to take a step back and realize that there is no science to creating wealth–we can all do it!

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  • Loved the analogy, although I got through college without any problems, except the need to work while studying in order to pay out my expenses. And yes, those four simple rules really can help, number 1 being the first priority of course.

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  • Thanks for the comments everyone.

    People get stuck in cycles/habits/routines/mindsets that are hard to break. Once they have that Aha! moment and start to see a better way, things can just seem to fall into place.

    Plenty has exactly this in mind. It gives people a different way of looking at their finances which helps to break those mental routines. At the same time it challenges users to make a change, while showing them what changes might help them the most. Plenty then gives them an incentive to make that change stick.

    Another simple way to think of it is like credit card reward points for saving (instead of spending).

    It’s a powerful feedback loop that I know will help people to take control of their money, no matter the size of their paycheck.

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  • I think its easy to get stuck in the spot of ‘overthinking’ things. I found with university, it was tempting to take INTERESTING classes but were challenging… thus, bringing down my gpa.

    My friend, however, took BORING courses that were easy as could be, thus, bringing UP his gpa.

    Its an interesting trade off… worth it? I dunno!

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  • Great post! Thanks for the excellent advice!

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  • Simple enough and yet so hard for so many people to do. I’m definitely struggling with this but looking forward to making the necessary changes. Lifestyle changes are in progress.

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  • Excellent, timely advice, in light of the holidays and the current economic situation. All too often we overlook what’s simple and get bogged down in the complicated–particularly when it comes to financial management. Great post offering great insight.

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    • Glad it made a connection with you. Best of luck in the new year.

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  • I believe that nothing is impossible in this world as long as you are determined to make things possible. Building wealth doesnâ��t happen overnight. But with education, time, diligence, research and hard work, you can go from wondering how to build wealth to actually becoming wealthy and enjoying your millions!

    Reply
    • I couldn’t agree more Caolan. I like the way you think :)

      Reply

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