n91) How to Build Wealth From Nothing - It Is Possible!

 How to Build Wealth From Nothing - It Is Possible!

Learning how to build wealth from nothing might sound like “mission impossible”, especially if you have always believed that wealthy people either inherit their wealth or have benefited from powerful connections.

However, a 2019 report by Wealth-X showed that 67.7% of the world’s ultra-wealthy population (defined as those with $30m or more in assets) were actually self-made. 

More interesting still is the rapid rise in this class of ultra rich. In the 2019 report, there were 265,490 ultra-wealthy individuals; in the 2020 report, that number increased by almost 10% to 290,720.

The above data reveals two things for us: first, it is possible to build wealth from nothing, and, second, those who are achieving the “impossible” are doing so with increasing frequency. 

Today, instead of fantasising about the wealth you wish you inherited, we implore you to discover the many ways you can learn how to build wealth from nothing.

In this video, we will look at 6 actionable steps that you can start working on today to begin to build wealth from nothing and get on track to living a more financially free lifestyle. 

1: Educate yourself about money

Our mindset is always the first thing that needs to change before we can truly approach any larger transformations in our lives.

“Everyone has the ability to build a financial ark to survive and flourish in the future,” said Robert Kiyosaki, business magnate and author of Rich Dad, Poor Dad. “But you must invest time in your financial education to build an ark with a solid foundation.”

The first step to building wealth from nothing is thus to invest time in your financial education. Become familiar with essential terms like income, expenses, net worth, return on investment, passive income, and financial independence, among others.  

Read books, listen to podcasts and interviews, take courses, and follow financial education blogs like Sarwa’s. 

Keep in mind that financial education, like every kind of education, must be a continuous activity. Never stop learning.

2: Get a regular income source

It’s hard to build wealth from nothing without a regular source of income. You cannot invest without saving money, and you can’t save money without a regular income. 

This is to say that people don’t build sustainable wealth from multilevel marketing, Ponzi schemes, or betting. 

Learn to ignore people who promote get-rich-quick schemes that build wealth just by working three hours a week. Sustainable wealth comes from creating value over the long term. If you are not creating intrinsic value and earning income from that good or service, it’s truly impossible to build sustainable wealth. 

3: Create a budget

Creating a budget and sticking to it is crucial if you want to know how to build wealth from nothing. 

Using that regular income source we just spoke of, now you need to create a budget to take control of how you are spending your money, usually set on a monthly basis.

A budget is a financial plan for a defined period that contains estimated income and expenditures for that period.

Every household and/or individual needs to create at least a monthly budget to identify your expected income and estimated expenditure. Living without a proper budget is like sailing without a compass, and you can guarantee that you’ll get lost in the seas of financial missteps. 

A popular budgeting technique is the 50:30:20 rule. In this technique, you can formulate a budget where 50% of income goes to essential expenses (rent, mortgage, food, healthcare), 30% to non-essentials like shopping, vacation, entertainment, and 20% to savings and investments.

4: Have enough insurance (but don’t overinsure)

One core item you should have on your budget is insurance. Insuring yourself and your main assets (properties, cars, etc.) prevents you from incurring massive losses in the case of undesirable events. 

At the minimum, you should have health insurance, so you don’t break the bank in the unfortunate event of a costly disease. If you don’t have one, research and compare health insurance plans in the UAE and choose the one that is best for you.

If you own your home and a car, consider homeowner and auto insurance. Also, if you have kids and dependent relatives, consider subscribing to term life insurance.

Building wealth is good, but it will be excruciating if you lose your wealth to unforeseen circumstances and events. So be proactive and insure the things that are most valuable to you. 

5: Practice “extreme” savings from your income

While the 50:30:20 rule is a good place to start, you’ll find that you can save a lot more if you put in the effort. 

Once you are committed to building wealth, there will be many items in your budget that you can reduce or cut. You won’t be alone in doing so. Today there is no shortage of communities that promote ways to practice “extreme” savings. 

The “Financial Independence, Retire Early” movement, known as FIRE, is among the most popular.

They promote “extreme” savings strategies that encourage adherents to save a huge percentage of their monthly income. 

Jacob Lunk Fisker, one of the FIRE movement’s founders, proposed (and practiced) a strategy that called for investing 60% to 80% of one’s monthly income. Fisker ended up retiring at the age of 33 and now lives on $7,000 per year outside of Chicago.

6: Build an emergency fund

Now that you have learned how to save a significant part of your income, the next course of action to build wealth from nothing is to create an emergency fund. 

An emergency fund is like self-funded insurance. It’s money you set aside for unexpected expenses like car repairs and unforeseen circumstances like job loss or pandemic-induced lockdowns.  

When unexpected expenses and unforeseen circumstances arise, there are ways to make matters worse: incur debt and/or sell your investment(s). 

You pay interest on debt, and when you sell your investment(s), you lose both the amount you sold and the interest from the market exposure it could have earned if you didn’t sell.  

Therefore, to avoid those two scenarios, we recommend you learn how to start an emergency fund right away. An emergency fund should hold between three to six months of your monthly expenses. Also, ensure those funds are in a savings account where you can easily access them when the need arises. 

Like insurance, an emergency fund won’t make you wealthy, but it will prevent you from selling your investments or incurring debt during emergencies. 

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