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Whether it is from saving or investing, most people have aspirations to increase their net worth or even become a millionaire. Some choose to live frugally to pad their savings accounts, and others take risks through high-return investments. However, if you want to make it to the Forbes Richest List, you will have to make some bold financial decisions to grow your wealth.
Quick Take: How To Build Wealth
A quick way to take stock of your current wealth is to add the total value of all your tangible and intangible assets, then subtract debts. Once you know your starting point, you can begin building wealth. While it may seem somewhat impossible, learning how to build wealth is quite simple. No matter how old you are, with determination, you can amass wealth just like those on the Forbes Richest List.
Keep in mind that building wealth is not an overnight process. Here are some key takeaways to know:
- Determine your net worth to establish your starting point.
- Set short-term and long-term financial goals.
- Earn additional passive income when possible.
- Automate your savings and investments.
- Develop good spending habits and saving strategies.
- Pay off high-interest debts first to reduce interest rates overall.
- Continuously invest your savings and balance your portfolio.
10 Steps To Build Your Wealth
With dedication like Bill Gates, you can grow your wealth fast like Elon Musk. Before starting on this journey to boost your earned income or even shoot for $500 billion, you should equip yourself with financial education. That alone should give you a jump start on these ten steps on how to build wealth.
- Venture into business
- Increase your income
- Improve your skill set
- Create a budget
- Start an emergency fund
- Pay off debt
- Live below your means
- Diversify your stock market portfolio
- Invest in real estate
- Retirement savings plans
1. Venture Into Business
The wealthiest people in the world are not employees but business founders. Entrepreneurship fulfills two aspects of wealth building: income and high returns on accumulated wealth. Therefore, if you have a business idea that can increase your income, get started.
It doesn’t have to be a huge business. You can start a small business and offer the services you’re good at. For instance, thanks to the internet, you can create an entirely online-based business. If you’re busy with other things, you can hire people to run the business for you.
Who Is the Richest Person in the World?
Though it does fluctuate from time to time depending on such variables as where Tesla stock is at or how much Amazon is producing, here are the richest people in the world according to Forbes:
- Elon Musk
- Jeff Bezos
- Bernard Arnault
- Mark Zuckerberg
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2. Increase Your Income
Whether it’s part-time passive income or a full-time salary, when seeking your next job, make sure to get the most bang for your buck. You should factor in the cost of education, skill set required and other factors before picking a profession.
Higher-Paying Jobs
You can check out the U.S. Bureau of Labor Statistics for a detailed occupation database. From there, you can see high-paying jobs and their subcategories that you can apply to. Good examples of professionals paid highly include physicians, managers, nurses and engineers.
Side Hustles
Even if you have a job, you don’t have to only rely on your paycheck. You can run a successful side hustle to increase your income. You can turn your talent or hobby into monetary value during your free time.
There are many lucrative side hustles you can run online as long as you have internet access. These include:
- Working as a virtual assistant
- Freelance writing and editing
- Copywriting
- Online tutor, coach or consultant
- Web design, app development, coding, etc.
Other side hustles to consider include:
- Part-time professor at a local college
- Part-time gym instructor
- Freelance bookkeeping, tax preparation, tutoring
- Becoming a shopper
- Part-time driver for a ride-sharing or delivery service
3. Improve Your Skill Set
There are two ways you can grow your income and investments. You can either lower your expenses or increase your income. Most people focus on the first, forgetting the latter. You can increase your income by honing your skill set. This could include getting a degree, an MBA or a special designation, which can all earn you a promotion and salary increase.
4. Create a Budget
A budget is your financial plan, with expenditure estimates versus your income. A budget is an important tool in wealth creation. It gives you a view of your expenditures — the things you can cut to increase your savings.
To maintain a feasible budget, you should create a new one every month. Can you imagine a sailor without a compass? That’s what a person who spends their money without a budget is like. Imagine what might happen if someone who’s unprepared suffers a setback, such as a devastating financial crash?
One of the most popular and effective budgeting techniques is the 50/30/20 rule. This method suggests that 50% of your income goes to essentials, like food, rent and healthcare. Thirty percent goes to nonessentials, such as shopping and luxury activities. The remaining 20% is the most important allocation, which should go to savings.
5. Start an Emergency Fund
Emergency funds prepare you for unexpected events, like losing a job. Such occurrences can disorient your wealth building without emergency funds. Two common outcomes are selling the investment or incurring debts.
If you incur debts, your wealth starts diminishing. Also, you’ll have to pay interest for the debt. If you sell your investment, you lose the capital and interest you would otherwise earn. So, to avoid such scenarios, build an emergency fund as your backup money to settle surprise expenditures.
6. Pay Off Debt
Debt — whether it’s credit card debt, mortgage debt, student loan debt or any other kind — can pull you down every time you try to build your fortune. You can start by paying off high-interest debt, so you can save money and start building wealth.
7. Live Below Your Means
Overspending can dramatically impact your ability to build wealth. Cut spending on unnecessary things like eating out, buying designer clothes and regular vacations. While being frugal can be boring and unsatisfying, you’ll amass wealth over time and find it rewarding.
8. Diversify Your Stock Market Portfolio
Buying company shares is one of the best and most straightforward ways to build wealth. Through shares, you become a shareholder, owning a piece of the company. Buying stocks through exchange-traded funds is a transparent and risk-free form of investment.
ETFs are passive funds that are less risky. They help investors evade high fees and taxes. They also allow you to diversify your equities. That means you can focus your investment on specific ETFs, like emerging markets, developed markets or American markets.
Even though stocks are much riskier compared to other assets, they have the best return on investment. With the right strategy to diversify your investing options, you can lower the risks and maximize the returns.
9. Invest In Real Estate
Investing in real estate investment trusts gives you a chance to profit from the real estate industry without direct involvement. REITs are essentially real estate company stocks involved in buying and selling properties. Mortgage companies also fall into this category.
Every time the company’s value increases, you gain as well. REITs boast very high dividends, which you can reinvest for more returns.
10. Retirement Savings Plans
Retirement planning is crucial for not only building your wealth but also securing your financial future. Two popular examples include 401(k)s and Roth IRAs.
401(k)
A 401(k) is a defined contribution retirement account that employers offer their employees. You can dedicate a percentage of your pretax salary to this account by signing up for automatic deductions from your paycheck. Your employer can also match your contributions.
The investment earnings in a traditional 401(k) grow tax-deferred until withdrawn. If your employer offers it, you should take advantage of it. Though this is not a fast method on its own, you’ll be surprised at how quickly your wealth can increase if you combine it with other strategies.
Roth IRA
A Roth IRA is an individual retirement account that allows for tax-free withdrawals, as long as you meet certain conditions. Investing in a Roth IRA is a perfect option if your employer doesn’t offer a 401(k). The 2024 contribution limit per year is $7,000 for people under 50, while those 50 and above can contribute up to $8,000. The best thing about a Roth IRA is that you fund after-tax dollars, unlike a traditional IRA, where you fund pretax dollars.
Final Take To GO
The most fundamental steps to building your wealth are having multiple income streams, saving money and investing. Remember, saving or investing small amounts regularly compounds into substantial wealth over time. You won’t make it to the Forbes List, or become one of the richest people in the world by accident.
FAQ
- What is the fastest way to build wealth?
- Here are some steps to take to build your wealth:
- Venture into business
- Increase your income
- Improve your skill set
- Create a budget
- Start an emergency fund
- Pay off debt
- Here are some steps to take to build your wealth:
- How do I start building my wealth?
- To build your wealth, set a savings goal. Then, it's time to invest. When you invest your money, it gives you more money in return. Investing your income in the stock market, and in real estate and retirement accounts like a 401(k) or a Roth IRA, can build you build massive wealth over time.
- How do I start building wealth at 40?
- If you start at 40, you still have 25 years to build your wealth before the retirement age of 65. Here are some tips:
- Live below your means
- Diversify your stock market portfolio
- Invest in real estate
- Invest in retirement savings plans such as a 401(k) or Roth IRA
- If you start at 40, you still have 25 years to build your wealth before the retirement age of 65. Here are some tips:
Caitlyn Moorheadcontributed to the reporting for this article.
Information is accurate as of Aug. 12, 2024.
Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.
- IRS. 2022. "Retirement Topics - IRA Contribution Limits."
- Forbes. 2023. "THE REAL-TIME BILLIONAIRES LIST."
