The requirements for building, managing and preserving wealth are simple, mundane and practical, if you choose to pursue it. The requirements are:

• Commitment so that you prioritize the steps, habits and behaviors necessary to build wealth; otherwise, life will just get in the way.
• Planning and creating systems based on proven principles and strategies that actually work.
• Action because nothing happens without persistent, disciplined action over the long term to reach the your wealth goals.

What is “Wealth-Building?”

Wealth building is the process of generating long-term income through multiple sources. The sources includes savings, investments, and any income-generating assets. The wealth building definition requires proper financial behaviors, planning and goal,setting. Many individuals turn to wealth building as a way to achieve financial freedom and acquire cash flow to fund their lifestyle and retirement.

The 4 Steps to Building, Managing and Preserving Wealth

To build wealth, you must follow four simple steps: make money, save money, invest money and manage cash flow. Before investing, it is essential to have a reliable source of income. After securing a reliable source of income, it is recommended save regularly and paying yourself first. Finally, it is time to invest in assists and manage your cash flow.

1. Making Money

This step may seem obvious and is fundamental to wealth-building. A small amount of regular savings from your income can compound into a substantial amount. An important question to ask yourself is whether or not your current job can provide you with a regular amount of savings for 40 to 50 years. If not, it may be time to look for ways to increase your income.

The two basic types of income are earned and passive. Earned income comes from your employment, while passive income comes from investments. To increase your earned income, you may first have to make changes in your occupation. Consider investing in your education and other forms of training to help you become a stronger candidate for your desired job.

2. Saving Money

The second key to wealth-building is setting aside a portion of your earned income regularly. Once you have saved enough, you can start investing to grow passive income. Here are a few ways to to start saving money:

• Keep track of your spending each month, and then eliminate the spending that you don’t need or does not align with your values
• Adjust your budget to the point in which you’re saving every month.
• Always have about 6 months’ worth of expenses saved in case of emergencies. Having a cushion will help prevent you from derailing your finances every time something unexpected happens.
• Contribute to your retirement plan. If your employer offers a matching plan, definitely take advantage of it. Don’t leave free money on the table.

3. Investing Money

Once you have saved, you can start investing your money. However, to build a diverse investment portfolio, you will have to take a few risks. It is important to research how much asset allocation is appropriate for you. While you can do this research yourself, using a financial advisor is also recommended for new investors. They can help you gain clarity on your investment goals, time horizon, and how much risk you can stomach. Based on these insights, they can help you build a diversified portfolio that is risk-averse, moderate, or aggressive, based on your preferences.

4. Managing Cash Flow

Cash flow is king!

Your net worth, which is how wealth is measured, is an extremely important factor in wealth building. However, to live the lifestyle of your dreams, you must be able to generate positive cash flow from your wealth.

Cash flow is defined as income (cash in) minus expenses (cash out). And, the simpler your lifestyle and the better you manage your spending and expenses, the less income is required from your investments to live the life of your dreams and to achieve financial freedom.

To create a wealth building system, you can establish long term investing strategy and portfolio, and achieve financial freedom. Choosing the right wealth building assets comes down to which opportunities best suit your financial goals. With the right planning, investors can be well on their way to building, managing and preserving wealth.

In short, successful building, managing and preserving wealth are necessary requirements to achieve financial freedom. And, financial freedom buys you time and with time you can discover and experience what you really want out of life.

References:

1. https://financialmentor.com/category/wealth-building/wealth-program-system
2. https://www.fortunebuilders.com/wealth-building-assets/