How to Build Wealth, Part 1

Tuesday, April 14th, 2009 | Uncategorized

39197167_goldThe rules of building wealth don’t change.  They’re the same now as they’ve been for centuries.  It really boils down to two principles:

1.) Spend less than you earn
2.) Own things that produce cash flow or appreciate in value

Granted, these two principles can be sliced, diced and expounded upon forever.  Also, the nature of how one carries out these principles is varied and certain methods gain or lose popularity and effectiveness over time.  When building wealth, it helps to think of the motto for Perl:  There’s more than one way to do it!

Principle #1 deals with either cutting costs or growing income.  Personal finance writers dicker back and forth about how best to do this.  Some focus on extreme frugality while others set their sights on growing your income by climbing the corporate ladder.  Some love the idea of budgets, some throw them in the trash.

Principle #2 deals with investing and how to deploy the money you’re generating from Principle #1.  Again, this is an area of hot debate with many different disciplines such as stocks, bonds, real estate, commodities or even things that have fallen out of fashion such as Dutch tulips.

Stay tuned for part 2 of this series, where I will go into detail about Principle #1 - Spending Less Than You Earn.

6 Comments to How to Build Wealth, Part 1

SJ
April 15, 2009

So simple!!
Actually, it’s just one principle…

Money in > Money out, for all time between now and retirement =D

The 2nd just increases money_in(future) lol…

Chops
April 16, 2009

I would argue that you need #2 to take advantage of compounding. But you’re right - even if you just do #1 you can come out ahead.

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