The principles of wealth creation, when used together are the building blueprints that birth generational wealth. No matter what field, industry, or market you are in, these principles apply to you and should be taken seriously.
7 Principles of Wealth Creation
The Mentality
The first of our principles of wealth creation is mentality. Why? Because without the proper mentality, you can ruin the best laid plans.
For instance, Billionaire Warren Buffett refused to buy a new car because it was impractical. “Impractical“. He considered how little he drives, how much the car would cost in maintenance and gas and the fact that the cars he has are perfectly fine. He didn’t look at his bank account and see that he had the money in there to afford the car. And he still lives in the house he bought in 1958 for less than $40,000.
Conversely, M.C. Hammer, who spent around $500,000 a month on his entourage and staff. Probably the most expensive group of friends and employees anyone has ever had. And he had his house built, over 40,000 square feet that cost $30,000,000. Thirty million dollars! Shall we remind you that he only made thirty-three million dollars a year. During his most popular time! 33 million is a lot, unless you are spending it as fast or faster than you can make it.
However, the stark contrast between Buffett and Hammer isn’t so much about race. Although it can be argued that Hammer being raised in poverty, wasn’t taught the proper mentality. So we see, that the wrong mentality leads back to poverty. You have to first condition your mind to not fall into the “treat yourself don’t cheat yourself” mentality. Having the money to cover the cost of something doesn’t mean you can afford it.
Check out this video on black generational wealth and the mentality that is killing it here.
The Proper Plan
Secondly, next of the principles of wealth is having the proper plan. You won’t get far without a plan. Honestly, it’s like spinning your wheels if you don’t have a clear defined path on where you want to go.
I don’t just mean saying aloud that you want to make a million dollars, or you want to own a business. Those are vague goals…not plans. A plan is, the exact actions and timeline for those actions that you will take to achieve a specific goal.
You can’t just have a goal. You need an actionable outline that details the steps you need to take to manifest that goal into reality. Write it down. Think about it. Read it everyday. Even without meaning to, you will find yourself subconsciously taking steps to bring that goal closer to yourself. I wrote an article on how to pull of the perfect 5 year plan, read it here.
Lowering Expenses
Having the right mentality and creating the plan, are the first steps. But to be honest, most of us don’t have the immediate funds to invest in a new future. In order to create wealth, you must have money to invest. Where does that money come from. That’s number 3 in the principles of wealth creation.
Firstly, you must lower your expenses. For example, turning off lights and unplugging unused appliances. In addition, create a budget of what you spent the last few months. Everything you spent. You would be shocked on how much money goes to waste on simple things like subscription services. Entertainment is…well, entertaining. But unless it makes you money, you are just shoveling money into the pockets of someone who already has more than you.
Have you considered that meal prepping for the week instead of cooking everyday will save on gas, electricity, and water? Not eating out will save money in a multiple of ways. The money spent on gas for your car. The money spent for future medications due to preventable illnesses due to a poor diet. And of course, the money spent eating out to begin with.
Never forget the power of fees and interest. The ATM fees you incur instead of walking into the bank. The late fees on any and everything. Paying the minimum on your credit card will generate more interest to be paid in the long run.
Additionally, please don’t overlook the power of getting cashback for things you already buy, like toilet paper. Here, I detail a whole host of ways to capitalize off the cashback craze.
If you cut down on your entertainment expenses, food expenses, and bills, you’d be surprised how much money you would have to invest.
Increasing Income streams
Our 4th principle is about increasing your streams of income. Once you’ve begun your wealth building journey, you have to become adept at seeing opportunity. Those opportunities can be developed into multiple streams of income. And let’s be clear. You will need more than one stream of income to create wealth. The most important income you can make is the one you can make while you sleep.
There are multiple ways you can go about that. The most popular ones are of course real estate and stock investments. If you want to learn more about real estate, I’d suggest reading this article, “Real Estate Investing Done Right“. And if you want to know one of the easiest profitable ways to get into stock investing, start here with, “The Black Guide to Getting into the Stock Market pt 1“.
But those are only two, and like I said, there are many ways.
It always starts with one thing though. One skill or desire that you use. It could be as simple as braiding hair. Which I actually detail how to make a million dollars in 5 years doing just that, here.
You can capitalize off that one thing in many ways. You could create an online course and sell courses. Besides the beginning work, it’s all passive income.
You can even capitalize off your ability to read by narrating audiobooks. In this article, here, you can read the actual strategy of how to make an extra $100,000 a year just reading aloud.
That’s just a few examples. Regardless of what you choose for your multiple streams of income, just know, you need them. Relying on one income in this day and age is asking for trouble.
Mastering Taxes
On to the fifth. Nothing is certain but death and taxes they say. But is that really true? For sure, death is certain. But taxes? Let’s ask Donald Trump or the Walton family (owner of Walmart). Apparently taxes are only certain if you don’t know how to get away with not paying them.
Let’s be clear. These people aren’t doing anything illegal. Whether you think it’s unethical or immoral is a different matter. They just happen to pay big money to people who know how to find the tax loopholes that can save them money. Billions that they don’t pay because of these loopholes. And it’s not just for them. You can get in on the loopholes too. You just have to know how find them. And you don’t have to pay nearly that amount of money to do it.
Did you know you can pay your children to do chores around the house? Of course you know that. But did you know you can file that on your taxes? It’s all in the wording. After all, if you are paying them, then they are employees and that’s wages paid.
Did you know that having a business, even if you aren’t making anything in that business is a way to create tax write-offs and ensure bigger returns?
Knowing tax laws and how they work is one of the most important factors in preserving your wealth. Without that knowledge, your bank accounts will just be revolving doors, money coming in, and money going out.
I put together a guide that will help you navigate the most important tax lessons you will need to know. Get the guide! Follow the steps and start mastering your taxes. Your future wealth depends upon it.
Your Will and Testament
Numero 6 In our principles of wealth creation guidelines is a big one. Literally, this is the step that defines whether the wealth becomes generational or just situational .
Without a will in place, your wealth will be subject to unnecessary taxes, before being partitioned off according to state laws. Often, family members, friends, and charities you hold dear will receive nothing.
The backbone of generational wealth, is the passing of wealth. A proper will will ensure that your assets aren’t eaten up by taxes and are properly distributed according to your liking. A will can also express your wishes on the custody of your children and how they are cared for.
Don’t wait until you are old and grey. If you are 18 or over. If you have children. If you have or plan to have any assets. Have a will in place.
It doesn’t have to be a long drawn out affair. The movie scenes with the lawyers and dark stuffy rooms are just for show. You can type up a will in the comfort of your own home, and get it signed according to the laws of your state. All you need is to designate an executor, beneficiaries, and to have it legally signed.
Planning for Death
There are a few other things you need to be aware of when it comes to your passing. Estate planning, insurances, body disposition, etc. It’s important that you plan for these things. Don’t leave them to the last minute or it’ll be someone else’s decisions to make. And you won’t have a say in who they are, or what they decide. To learn more, read our article on legacy wealth management.
Each One Teach One
Finally, the Last of our principles of wealth creation is one of the most important concepts in creating wealth. It’s the idea that “many hands make light work”. Even from a purely selfish motivation, it can only be beneficial to help others grow their wealth.
The more that you pass on your knowledge on how to create wealth with others, the more likely there will be more wealth that can be tapped.
Let’s say you taught 6 people how to create wealth and years later, created an enterprise that needed investors. Subsequently, you would be more likely to get those 6 people to invest in your business.
Conversely, would you want someone to withhold information from you or your children out of the desire to be the only one who succeeds? It’s unnecessary and cruel. And let’s be honest, there are enough people out there trying to keep us down. We don’t need to do it to each other.
So don’t be stingy with your knowledge. Don’t operate from the mindset that there are only enough seats at the table for you and yours. We are all hungry, and if we set a place at the table for each other, we can all eat.
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