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How to Build Wealth

'Wealth, like a tree, grows from a tiny seed. The first copper you save is the seed from which your tree of wealth shall grow. The sooner you plant that seed the sooner shall the tree grow. And the more faithfully you nourish and water that tree with consistent savings, the sooner may you bask in contentment beneath its shade.' George Clason - The Richest Man in Babylon

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People have been building wealth for thousands of years. The interesting thing is the priciples for accumulating wealth (how to) haven't changed all that much. However, the tactics (what to do) have changed a great deal. Most importantly, it has never been easier to build wealth by investing in financial assets. 

Image by Simon Wilkes
The 3 Pillars of Building Wealth

How to Aquire Money

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Pay yourself first

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Get your financial infrastructure set up. Then save a minimum of 10% of everything you earn. This is the starting point - the creation of your first income stream.​​ Saving is a skill - how much you save is in your control. With a little effort you will get very good at it. 

How to Keep Your Money

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Invest wisely

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Saving by itself is not enough. You also need to invest wisely. Take advantage of tax free accounts. Keep fees low. Invest in broad based ETF/index funds. The return/earnings generated from savings will create your second income stream. 

How to Use Your Money

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The magic of compounding

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Keep saving every year. And do not spend the return that you are earning on your savings. Let compounding and time work their magic. This will result in the exponential growth of your investment portfolio - creating great wealth over time.

Book Summary: A Simple Path to Wealth by JL Collins

 

  1. Learn money.

  2. Freedom. The ultimate goal.

  3. Control your lifestyle.

  4. Embrace simplicity.

  5. Debt is not normal.

  6. Marry well.

  7. Avoid investment advisors.

  8. Avoid stock picking.

  9. Avoid market timing.

  10. Ignore market news.

  11. Vanguard Total Stock Market Index Fund (VTSAX)

  12. Wealth accumulation versus wealth preservation.​​​​

Live Below Your Means

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Living below your means is the fundamental building block that allows the average person to become wealthy over time. It is simple to understand. Wicked difficult for many to actually do. 

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What is it? Spend less than you earn.​

 

This action will allow you to save a minimum of 10% of everything you earn. Generating savings is the critical first step you will need to take to get started on your journey to financial freedom.

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It is also a mental model - a way to live your life. It comes easy to some people (usually those who value being financially secure). Other people, not so much.​​​ Our outlook/attitude on money and financial topics is heavily shaped by our childhood.​​

How to Build Wealth - Three of the Classics

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The Richest Man in Babylon by George Clason - published in 1926. It contains the principals you need to know to build wealth.​

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The Wealthy Barber by David Chilton - published in 1989. Chilton re-introduced many of Clason's ideas to Canadians. Note: some of Chilton's specific advice has become dated. Chilton's book has become the best selling book of any kind in Canadian history. 

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The Simple Path to Wealth by JL Collins - published in 2016. It provides a great up-to-date roadmap for average people. Note: the book is written for American's.​​

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This website offers some solutions to two of the problems with Chilton's and Collins' books: it is up-to-date and it has been written for Canadians. 

The Millionaire Next Door by Stanley and Danko

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​"....we have determined how 

ordinary people can become wealthy."

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​"Why aren't I as wealthy as I should be?" Many people ask this question of themselves all the time. Often they are hard-working, well educated middle- to high-income people. Why, then, are so few affluent. For nearly two decades the answer has been found in the bestselling The Millionaire Next Door: The Surprising Secrets of America's Wealthy. According to the authors, most people have it all wrong about how you become wealthy. Wealth is more often the result of hard work, diligent savings, and living below your means than it is about inheritance, advance degrees, and even intelligence. The authors identify seven common traits that show up again and again among those who have accumulated wealth. You will learn, for example, that millionaires bargain shop for used cars, pay a tiny fraction of their wealth in income tax, raise children who are often unaware of their family's wealth until they are adults, and, above all, reject the big-spending lifestyles most of us associate with rich people. In fact, you will learn that the flashy millionaires glamorized in the media represent only a tiny minority of the rich. Most of the wealthy in this country don't live in Beverly Hills or on Park Avenue-they live next door. Amazon Book Review

The Millionaire Next Door - 7 Common Traits

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  1. They live well below their means

  2. They allocate their time, energy, and money in ways conducive to building wealth.

  3. ​​​They believe financial independence is more important than displaying high social status.

  4. ​Their parents did not provide economic outpatient care.

  5. ​Their adult children are economically self sufficient.

  6. ​They are proficient in targeting market opportunities.

  7. ​They chose the right occupation.

Secure your financial future by getting a little better every day.      Questions? Email us at mymoneyclubcanada@gmail.com

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The material on this web site is not intended to be financial advice. It is intended to educate and entertain.

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