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I have been privileged to have had the opportunity to have worked with dozens of individuals who have created significant amounts of wealth. Although each of them have done it through different mechanisms, they all have followed a similar “blueprint” of sorts that have very common underlying tactics of a wealth builder.
After years of observing these similar tactics being used by these individuals on their way to reaching substantial success, I started to notice that there are approximately 7 primary tactics that when followed make up this template for success. Although many of these tactics are specific to generating wealth, many of them are actually how to “set up” one’s life, so to speak.
Choices matter
More specifically, it was the particular choices that these individuals made in those areas such as vocation, lifestyle, asset ownership and investing as examples, that had a major impact on their level of success.
In fact, in most cases these structural decisions created ‘foundational’ building blocks that in many ways formed the structure for this later success.
So what are these magical tactics that if followed can lead to a highly successful Life? In fact, there’s absolutely nothing magical about them at all. They are in most cases lower effort activities that are quite easy to implement but they are decisions that may be unconventional when compared to the decisions that are made by most other individuals. As a result, that makes them difficult decisions to make if not seen as part of a successful effort.
Going against the grain
In addition, if there are no other individuals known that have made these decisions it becomes very difficult for most individuals to go “against the grain” and do something different than the masses. However, that literally is the difference between being highly successful and perhaps struggling to find even a hint of success.
The 7 primary tactics that are critical to be a Wealth Builder are as follows:
1. Own the Money Machine
Picking the right vocation is the first critical element in being a prolific Wealth Builder. Although it is not impossible to become a Wealth Builder by being an employee (a worker or a W2), it is much harder.
The seminal writings on this subject and that still hold true to this day were identified by Robert Kiyosaki in his book “Rich Dad Poor Dad” where he identified that it is much more probable to become a Wealth Builder by being an Investor or a Business Owner and not an Employee (W2) or even Self-Employed.
Business Owners and Investors become Wealth Builders at a much higher percentage because they get natural leverage from the efforts of others, from capital equipment, by utilizing operating leverage and a host of other advantages, including tax benefits.
Therefore, picking the path of becoming an entrepreneur, business owner or investor is a much more prosperous path and has a higher level of probability to provide the opportunity to become financially successful.
2. Own Assets
In order to build wealth, it is critical not to trade hours for dollars, a one for one proposition. What you need to do instead is work to purchase assets which have the ability to generate income without you having to spend your own time earning it.
The correct assets literally work on your behalf, such as stocks, rental property and businesses. Basically these assets not only leverage your time, exponentially multiplying every hour that you spend, but it does the same for the hours of other individuals who are working for entities that you own as well.
3. Incorporate your Life
Due to the preferential tax code which favors business owners over W2 employees, it is essential to incorporate yourself into a business entity. As an example, you could be someone who likes outdoor recreation and owns boats, canoes, ATV’s and fishing gear.
If you were to incorporate as a Limited Liability Corporation (LLC) and legitimately operate a guide service, those items that you own and use to conduct business would now become business deductions.
So now instead of paying for these items out of your personal funds, since you are now incorporated as a business, you now get a business deduction. In an addition, you could also record your telephone, vehicle, equipment and even a portion of your house as tax deductions for legitimate business expenses. Obviously these items aren’t free, you still have to pay for them, but you now get to take a qualified tax deduction.
4. Non-Income Generating Assets
Wealth gets built when you invest your money in things that make you more money. In the world of wealth building the only thing that qualifies as a true asset are the ones that generate income for you.
That said, items such as cars, boats and jewelry, although they have some inherent value, are certainly not income generating assets.
In fact, items such as cars and boats not only don’t generate income, they cost money to operate and normally depreciate in value. Although controversial to consider, your single-family home is also not an income generating asset, as it too costs money to operate through maintenance and taxes.
The housing option that qualifies as an income-generating asset is a multi-unit where you would live in one unit and have others effectively pay your mortgage and operating costs for you by living in the other units.
5. Side Hustle
With the widespread growth of software tools to run a business on the Internet such as automated email, lead magnets, sales funnels and easily developed websites, being able to run a side hustle has now become easier than any other time in history. In addition, with the proliferation of social media platforms it’s so much easier to draw potential consumers to your business than ever before.
As identified earlier, incorporating a business allows you to receive preferable tax treatment through deductions in addition to providing you with leverage of other people’s time.
6. Automatic Investing
One of the biggest principles of growing wealth is ensuring that you invest your money in reliable investment instruments that generate income. However, it’s critical that you spend as much time in the market as possible and not try to time it.
The solution is to put your investments on automatic investing so that you are guaranteed on a regular basis that your money is working on your behalf through the ups and downs of the market.
Of course, one of the most important aspects of this principle is to take advantage of your employer’s 401(k) match but in addition, to do the same with a traditional IRA or ROTH IRA.
7. Multiple Streams of Income
Most wealth builders that I have known always had a business that they operated on the side. The most successful of them had a few. The challenge is to figure out a way to maximize your available time so that you can have multiple streams of income.
The mainstay of this strategy is to usually be involved in owning rental income property in addition to having a primary job that is used as the foundation to build wealth, as it provides needed income and benefits.
In addition to their day job and rental income property, wealth builders also look to own and operate other ventures that can leverage other people’s time and effort. The most successful individuals focus on those opportunities that require the least amount of their own direct time but that deliver as close to passive income as possible.
Conclusion
Being a Wealth Builder doesn’t happen by accident. From my observation of watching dozens of wealth builders create extremely successful financial lives, it’s a matter of having a particular foundational strategy like the one identified above and continually working it.
Leverage is the magic ingredient
Although there may be some tactics that are more impactful than others, the one element that appears to be the most important is to be involved in wealth building exercises that leverage other people’s money or time. This is reflected in tactics where other people are either spending their time in helping the individual generate income, such as in businesses, or spending their money to pay rent to the wealth builder who in turn has leveraged their down payment against the banks funds.
Leverage, focus and persistence. They may not be magic unto themselves but they sure have a central place in building wealth!
