The Critical Difference Between Making Money And Building Wealth

There’s a big difference between making money and building wealth. Making money is all about generating as high an income as possible by getting a high paying job or running a business. Building wealth, on the other hand, is about creating a stock of value that goes up over time.

Recently, US Trust went and asked more than 600 people with a net worth of over $3 million how they built their wealth. The report, entitled, Insights on Wealth and Worth, generated a significant amount of data which made clear the difference between making money and building wealth.

Here are some of the insights from that report that we can all use.

Build Wealth Slowly

The widespread perception of wealthy people is that they grew up with a silver spoon in their mouths, having rich parents and ample opportunity to do well in the marketplace. But it turns out that that is a bit of a myth. According to data from the study, 58 percent of respondents said that they had humbled middle-class beginnings, and a further 19 percent said that their families were outright poor. Further evidence indicated that only around 10 percent of the wealth of people in the study had actually come from inheritance. The rest of it (more than half) had been earned through income, and around 30 percent of it had come from investments.

handful of money image

Wikimedia Commons

What this showed, therefore, was that most wealthy people got to where they are today through traditional methods, like saving their money and making sensible investment decisions. Many said that they had a lifelong history of saving and investing, some beginning to do so as early as age 14.

Go With Basics Rather Than Newfangled Investments

What was so interesting about the survey was that the majority of individuals didn’t do anything innovative when it came to their investments. 89 percent invested in stocks and bond and in their businesses. Only 11 percent attributed their success to alternative forms of wealth management.

What this indicates is that the simplest methods are still probably the best. Yes, big investment houses might have complicated algorithms that make millions of well-diversified transactions every second on the stock exchange, but most people built their wealth through simple mechanisms, like a cash advance online to kickstart their businesses. It’s about having a great business idea or a well diversified portfolio – not looking for some get rich quick scheme using an unreliable investment product.

Ride The Market, Don’t Guess

Most people who get into investing think that they have to regularly predict where the market will head next. Sell high and buy low, right? Well, although that might sound like a great idea, it’s not usually how it works in practice, and it certainly isn’t how the majority of wealthy people in the study made their fortunes. According to the report, only 14 percent said that they made the bulk of their money by timing their investments. The rest said that it was just a case of “buy, hold and wait” for the stock price to go up.

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