The Basic Rules for Wealth Creation

Wealth creation rules

The following post comes from Adam at, a UK blog discussing all things personal finance. You can follow money bulldog on Facebook.

Creating wealth is one of the most deceptively difficult things to do in life. It might seem that all you have to do is keep on saving month after month. However, if it was that simple wouldn’t we all be rich? In fact, many people struggle to save and often find their level of wealth going backwards over time.

Perhaps the most frustrating aspect of trying to create wealth is that it is underpinned by some simple ideas, even if carrying them out is more difficult than it first appears. The following are some of the main aspects to consider.

Earn More Than You Spend

The initial starting point for making money has got to be that of earning more than you spend. Sure, some people borrow money to invest but this is a high risk strategy which I would only consider under certain circumstances. The safest base to start from is a decent income and a lifestyle you can afford. If you don’t have these two things then sooner or later you will run into financial problems. Of course, if you don’t earn more than you spend then you have a couple of different ways to sort it out; earn more or spend less.  Neither of these things is particularly easy to do but the long term benefits make it well worth taking time to work out your options. Maybe a new career, changing your eating habits, a cheaper car, moving to a different city or an overhaul of your current loans will help you achieve this important goal.

Invest Wisely

Ok, so let’s assume that you get the first step done well. Congratulations, you now have some spare money each month. What are you going to do with it? If you are going to create wealth with it then the next step has to be to invest it wisely. Leaving it sitting under a mattress or in a current account at your bank isn’t going to make it grow. So how will you make it grow? Well, there are a number of different ways of doing this. If you like to take a chance with your money then the stock market gives you the chance to make some big profits. However, you know by now that share prices can go down as well as up, so maybe this isn’t the right approach for you. The question then is to find the right level of investment for you. If you have enough money to play around with then the best idea is to diversify. Keeping some cash in a low risk investment while investing other amounts in riskier but potentially more rewarding enterprises can help you to grow your money if you get the mix right.

Get Passive Income Rolling In

If you earn money through a job then the amount of cash you bring in is directly related to how much time you work or how well you do it. A better way of building up your savings is by getting passive income coming in. This is money which you earn on a regular basis without doing much. It could be from a website you have set up and now let someone else run, commission from products you have already sold, rental income from a property or anything else of this sort.  If you have a good level of investments and can maintain your lifestyle without working too hard, then you can consider that you have cracked the wealth creation business.


Mr. Moneybanks said...

Thank you so much for your post Adam.
Passive income is so important and something I didn't touch on in the article that I wrote on your site.
I'd definitely recommend checking out Adam's site for more information on different ideas for generating passive income. It requires a lot of work upfront but is worth it for the cash inflow afterwards!

Ryan @ Impersonal Finance said...

Yes! It's so simple on paper, but it really takes the work and action to make it happen. I'm still working on step 3 myself, trying to generate passive income through my blog, and dividends that I'm automatically reinvesting. It's not an immediate payoff, but hopefully it will be worth it in the long run!

Mr. Moneybanks said...

Absolutely Ryan - Reinvesting Dividends is key to wealth building. Gotta love compound interest. Does that mean that you buy shares purely based on the dividend yield then?