When we hear about wealth creation it is usually presented as gaining money and other valuable assets. Make money, then invest it to grow your net worth – a common formula. Those who look a little deeper see that assets alone don’t necessarily pay the bills, stress making your money and assets work for you to produce streams of income. In any case the basic idea as understood by most people is that wealth creation is a matter of accumulation
There are five level of wealth creation
- First Level
Your are working for 8 hours and you get paid for that eight hours .Eight hours of your life you dedicating and you get paid for that this is the lowest level of wealth creation
- Second level
Skills to earn wealth.In this level certain level of skilled is involved but you still sealling your time to genrate your wealth.In this level your leverage is your skills greater your skills greater you will earn in less time
- Third level
Now you don’t selling your skilled but you selling your knowledge also know ha white collar jobs and popular in certain level of peoples
- Fourth level
In this level you using your knowledge,skills and some assets to generate wealth..In this level of generating wealth Sometime wealth involved or sometime only idea do every thing like facebook Mark Zuckerberg have idea and become the among top richest person in the world
this is the highest level of wealth creation .In this your are not selling your time not selling all your skills.You package all these and your managing experience .Now your are selling combo hybrid of multiple things
This is the first factor in which your are independent from time time is not factor to generate wealth creation
- Fifth level
Investor level is the biggest level of wealth creation in this level you are not selling your time not selling your skills even not selling your management your invest in someones else business or in someones ideas
This article was originally published in Wedgewood Life magazine and is reprinted with their permission
, we laid out some basic personal finance concepts including spending less than you make, pursuing a career you are passionate about, and discussing the long-term benefits of home ownership from a net-worth perspective. In addition, we highlighted the typical phases of lifetime wealth development starting with wealth creation, progressing to wealth accumulation, and ultimately the final stage of wealth distribution. This month we will focus on wealth creators.
We define wealth creators as individuals beginning to understand basic personal finance concepts and starting to establish personal wealth. Wealth creators are starting their careers, experiencing increased earnings potential, and trying to adhere to sound personal financial principles. When we work with wealth creators, we focus on the following planning items:
- Develop an initial high-level financial plan – The creation of a comprehensive financial plan is critical to achieving long-term financial independence. For someone beginning to experience wealth creation, the main focal points of an initial plan include establishing some long-term financial goals. These goals could include how much to dedicate to my children’s college expenses, whether to buy a vacation home, desired retirement age and spending capabilities, or the need for life insurance planning for the unforeseen. As wealth accumulates, the financial plan will evolve. Over time your plan will include social security planning, including Medicare eligibility and other health insurance options, along with other financial planning variables.
The other tangible benefit of establishing an initial baseline financial plan is the ability to reference it in the future when evaluating financial decisions such as how and where to invest additional excess cash flow as income levels increase, contemplating financing options for various expenses, and other financial decisions that will arise as one moves from wealth creation to accumulation.
- Your savings rate is really what matters, not your income – The below chart illustrates a simple, yet powerful message that wealth creation and longer term wealth accumulation is not about your income level, but about how much money you save.
The chart below compares two individuals over a 20 year period – a lower income, higher saver earning $60,000 and saving 15% per year versus a higher income, lower saver making $120,000 and saving 5% per year.(This example assumed no wage inflation and a 5% rate of return.)
As you can see, the difference in the annual savings amount is $3,000 (15% of $60,000 versus 5% of $120,000). The aggregate investment balance between the two investors widens over time which is driven by the annual $3,000 savings difference combined with the power of compounding interest at an assumed 5% rate of return. At the end of this 20 year period, the lower income, higher saver has an ending investment balance roughly 1.5 times higher and almost $100,000 larger than the high income, lower saver.
In this example we kept the financial variables fairly simple.Although real-life variables will differ, the key concept remains the same – develop a personal financial discipline to increase your savings rate over time instead of spending income increases.The potential long-term financial benefits of an increased savings rate can be staggering. The continuous saving of excess cash flow paired with an investment rate of return is how a person evolves from wealth creator to wealth accumulator.
Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Individual situations can vary, therefore, this information should be relied upon when coordinated with individual professional advice.