Disclaimer: Good Day, Readers. WealthBuildingPowers blog is a financial literacy/competency blog and does not provide specific investment recommendations.
Today’s Blog is Summarized in the below podcast. Click to listen.
What’s the primary difference between the wealthy and those who are not?
The current and future wealthy are investing in assets. The richest 10% of Americans own a staggering 93% of the U.S. stock market. In contrast, more than half of American households lack any retirement savings.
The Importance of Asset Ownership
Wealthy individuals understand that accumulating wealth goes beyond simply saving money; it’s about investing in assets that appreciate value over time. Assets include stocks, real estate, businesses, intellectual property, cryptocurrency, precious metals, etc. These investments have the potential to generate returns that far exceed the meager gains of traditional savings accounts, which often fall victim to inflation. However, these investments have the risk of losing significant dollars. I have purchased some LOSERS!
Since 1995, the purchasing power of a dollar has decreased by about 52%. Meanwhile, the S&P 500 stock market index has delivered a return of 840.5%. To put this in perspective, if you had invested $10,000 in the S&P 500 in 1995, you would have roughly $84,050 today. Conversely, if you had opted to keep that money as cash, it would only be worth around $4,800 in today’s purchasing power. Investing in GOOD assets is vital for building and preserving wealth.
Several factors contribute to the financial disparity
Disposable Income
Wealthier individuals have more disposable income. Those with money can invest in assets and grow their wealth further. In contrast, many lower-income Americans find themselves in a cycle of living paycheck to paycheck, with little or no money left over to invest in assets that build wealth.
Lack of Prioritization
Another noteworthy reason is the lack of emphasis on asset accumulation among poorer Americans. Often, people may view immediate consumption as more critical than long-term investments. Financial constraints can lead to prioritizing short-term needs and wants over long-term financial strategies. I used to own rental property in Chicago, and my Section 8 tenants would state they needed space for their king-sized beds and televisions, which, in some cases, were larger than what I owned.
Strategies for Building Wealth
What if you find yourself unable to afford to invest in assets? There are actionable steps you can take to change your financial trajectory.
1. Cut Your Expenses
The first step to freeing up funds for investment is to examine your spending habits critically. Use a budget. Analyze your monthly expenses and identify areas where you can cut back. Maybe it’s dining out less often or re-evaluating subscription services you no longer utilize. Every dollar saved can be directed toward investing in assets that build wealth.
2. Seek Free Financial Education
For many, the notion of investing can be intimidating. Fortunately, educational resources are more accessible than ever before. Free financial education is available online through blogs, podcasts, webinars, and social media platforms. Find reputable sources offering insights into budgeting, investing, and wealth-building strategies. The public library remains a great option.
By actively consuming various financial education resources, you can gain a broader perspective on allocating your money. Remember, the first advice you receive isn’t necessarily the best. The more content you explore, the better equipped you will be to make informed financial decisions.
Shift Your Mindset From Consumption to Investment
It’s crucial to shift your mindset from immediate consumption to long-term investment. This alteration in perspective can be transformative. Start thinking of your finances regarding potential growth rather than merely meeting current needs. I used to dream of buying an expensive car. Fortunately, I realized that investing more in my 401K, the stock market, and real estate was better. These assets allowed me to retire at 57. Today, I still save every month.
Imagine prioritizing small, consistent investments in assets, even if it’s just a little every month. Over time, these investments can compound, leading to significant wealth accumulation and greater financial security.
The Growing Importance of Financial Literacy
Understanding financial concepts can be profoundly empowering. Enhanced financial literacy allows you to make informed money decisions and dismantle the barriers contributing to economic illiteracy.
Consider ways to engage with your community through workshops, discussions, or study groups focused on finance. A supportive network can bolster your financial education and encourage conversations that foster growth and learning. I belong to an investment club of like-minded individuals. I learn from my fellow members.
Conclusion: Building a Path to Wealth
Ultimately, the difference between wealthy people and those without assets often comes down to actions taken and habits formed. Wealthy individuals invest in assets because they understand that these assets generate wealth over time, particularly in a world where cash savings are losing value to inflation.
If you currently find yourself on the other side of the wealth gap, remember that it’s never too late to change your financial trajectory. By cutting unnecessary expenses and investing time in acquiring financial knowledge, you can begin to build a solid foundation for your future.
I HAVE BEEN BROKE AND WEALTHY. I PREFER WEALTHY!
The paths to financial freedom are UNLIMITED. CHOOSE YOUR OWN!
LET’S MAKE SOME MONEY – CRYPTOCURRENCY, ANYONE?
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YOUR GREATNESS IS NOT WHAT YOU HAVE; IT’S WHAT YOU GIVE! – SOME CHARITIES I SUPPORT
St Jude Hospital: The mission of St. Jude Children’s Research Hospital is to advance cures and means of prevention for pediatric catastrophic diseases through research and treatment. Consistent with the vision of our founder, Danny Thomas, no child is denied treatment based on race, religion, or a family’s ability to pay.https://www.stjude.org/
Wounded Warrior Project: An American charity and veterans service organization that offers a variety of programs, services and events for wounded veterans of the military https://www.woundedwarriorproject.org
Folds of Honor: Providing life-changing scholarships to the spouses and children of America’s fallen or disabled military. And now, our mission expands to the families of America’s first responders. On our watch, those who protect our freedoms and our families will know they are not forgotten. https://foldsofhonor.org
Wilson’s No-Kill Animal Shelter: A N0-Kill shelter that is a top-rated non-profit. They compassionately care for all their animals. https://wilsoncountynokillanimalshelter.mywcn.com/
Tunnel To Towers: Since 9/11, we have been helping America’s heroes by providing mortgage-free homes to Gold Star and fallen first responder families with young children and by building specially adapted smart homes for catastrophically injured veterans and first responders. We are also committed to eradicating veteran homelessness and helping America to Never Forget September 11, 2001. https://dogood.t2t.org/give/320847/#!/donation/checkout
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ABOUT ME
I am a proud nerd (as my beautiful wife and daughter have told me) investment and finance blogger with an NC. State, Chemical Engineering, University Rutgers, MBA and Harvard University, Advanced Management education.
I left a corporate career because I desired to make a difference as a speaker and writer. I was blessed to be coached and mentored by strong women and men in my family and professional life. It is my time to serve and give back.
DISCLAIMER
I started my first business at ~13 years of age (a small but brilliantly created plant nursery). I am a successful investor in stocks, options, and real estate and am happy to share my finance and investment lessons. I am NOT a licensed financial advisor. Please do not construe my suggestions on this blog as recommendations for your situation. As an investor, you must establish your risk/loss tolerance. Investment in any asset involves risk, including complete loss.
Please seek your licensed CPA or fiduciary financial advisors for individual financial advice.
I write this weekly blog to make an impact by reaching an audience and demonstrating the need for financial literacy. I will help you get there.