The Five Pillars of Wealth Building

Building wealth is a lot like constructing a building with Lego blocks. Some are excited by the prospect, others detest the idea, calling it materialistic and superficial. You’re given a sheet of instructions with instructions on the ‘right’ way of going about it, and you can choose to follow it or not.

Unlike Legos, however, reality does not let anyone escape the game of wealth building.

Think of this post to be the manual inside the box of Legos. There are a lot of ways to go about doing it, but here are five tried and tested pillars that can serve as guidelines on your own journey..

1. Invest in Yourself

Sounds like a cliché one-liner, but this one definitely deserves the tag. But how does one invest in oneself?

Investing in oneself involves nurturing the mind and developing useful skills. The more you read, the more you think. The more you think, the more you create. You get to decide what goes into your mind and direct your thoughts accordingly. Most people just don’t realise this and remain content going through the motions. .

Read extensively on topics that interest you, watch media that poses philosophical questions that force you to challenge the way you see the world. You need to ideate to get ahead in this world, and good ideas are the byproduct of a well-nurtured mind..

In order to bring ideas to life, you need skills. Master a skill to a level that makes you a specialist. (Getting a computer to display ‘Hello World’ doesn’t count!) Diversify and try out multiple things to understand what interests you and you are good at. Work on the things that genuinely interest you and hone those skills to the level of mastery.

When you are at a level where you can provide value to the world that few others can, monetising your skill becomes the easy part.

2. Generate Income

So how do you generate the cash flows that feed the well of your wealth? Your income is what gives you the corpus to start investing and truly accelerate wealth creation.

Income can be created when your ideas and skills need to come together and create value. Entrepreneurs sell goods and services at a price greater than it costs to procure or build them because they create value -- by making things easier to discover, easier to purchase, or connecting people together.

To monetise your skills and ideas, they first need to be showcased. Irrespective of scale, convert your abilities into tangible products and put them out there for the world to see (and value).

Your skills are no good if they remain confined within the four walls of your room. When they are visible and usable, they create value for the world, and then for you.

3. Make budgets and track expenses

Once you create value and start earning a reliable income, managing money becomes more important than making it. Money has this magical ability of vanishing into thin air.

Always pay yourself first by setting aside some money as a reward for the work you put in. Only then should you pay others and buy their goods and services.

Budgeting is an essential skill that ensures you are always aware of how much money you have to work with and how to allocate for necessary expenses and savings.

Start saving early, put aside emergency funds for unforeseen expenditures, set goals for how much you want to save, check these goals often and calibrate your spending accordingly. There is no shortcut for building wealth. Discipline is the key.

4. Make smart investments

The biggest lie most of us have been told in our lives is to ‘save money’.

Don’t just save money. Invest it.

As you create value, earn money, and manage it with discipline, you’ll notice that it starts to accumulate. When you have enough to oversee your daily needs and a liquid emergency fund for a rainy day, it is safe to assume you are well on the road to true wealth.

Now, it is time to invest it and nurture it so your little backyard garden becomes a strong, self-sustaining forest.

Investment ideas don’t just come knocking at the door however, so it is important to smartly analyse and identify strong investment opportunities. (Did you know Jeff Bezos made a return of 981% on his investment in Uber?) Identifying such opportunities and playing the winning hand requires constant research and personal conviction.

Look for companies or individuals whom you feel comfortable investing your hard earned money in, so they can do what you did, create value and build wealth -- a portion of which you are entitled to. But do not make these decisions based on personal bias or gut instincts. Trust the cold, hard facts.

5. Protect your assets

Diversification is protection against ignorance.

Those are Warren Buffet’s words, not ours. You can either research and understand something so completely you can deploy significant capital to it knowing all the risks, or you can diversify your wealth into multiple assets to cushion you from any mistakes you might make in your ignorance. Both strategies have their own value, based on your personal risk appetite, but make sure you are always protected -- either by significant knowledge of the industry, or through smart diversification.

Invest in firms you’re genuinely excited about, such that staying informed about them and the sector they operate in becomes a pleasurable activity, not a chore.

If you operate in a field with large tax implications, understand what are the best ways to legally get rebates and exemptions. If you hold a lot of physical assets, ensure they are adequately insured. In case your wealth is highly dependent on Intellectual Property (IP), consider getting patents that help you retain a competitive advantage.

Always remember, getting wealthy is only one part of the journey. Staying wealthy and continuing to build more is the true nature of the game.

Those were the five pillars of building true wealth. Like we said in the beginning of this post, this is a guideline of tried and tested methods of building wealth. As the world changes and the Internet continues to democratise access to talent and resources, you may find new and more efficient ways of getting wealthy. If you do, leave a comment and let us know.

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