Money isn’t taught in schools. It seems that students are taught everything, but what they need to know to be a highly functional adult. With 78% of the population living paycheck to paycheck, it is highly unlikely that money is taught in homes either. However, in some select homes, families are teaching their children the fundamentals of how to manage money and how to create wealth.  In these discussions, they are learning the 3 paths to wealth that sustain their wealth for generations.  Most of the population are not privy to these conversations, but this article will share the paths that have made the majority of the millionaires and billionaires in this country.

The three paths to wealth are: Investing, Real Estate, and Entrepreneurship

Investing

“Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.” – Warren Buffett

One path to wealth is through investing in the stock market.  Investing allows you to gain ownership (equity) in a company without being involved in the day to day operations.  A public-traded company’s primary objective is to satisfy the shareholders because they own the company.  While the company wants to also provide quality goods and services to the consumer, it’s main goal is to maximize the profit for the shareholders.

Instead of just being a loyal consumer of your favorite brand, you need to be on the other side of the table as a shareholder.  Seek ownership in the products that you use faithfully and you win on both sides of the equation – when you purchase the good or service and when the company profits.

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There are several ways to start investing in the stock market. You can purchase individual stocks, mutual funds, exchange-traded funds, or real estate investment trusts through a broker or an online discount broker; just to name a few.

In addition to the different financial products you can purchase, there are also various strategies for investing as well.  For example, you can choose a long term strategy such as buy and hold for a long period of time or day trading, where you buy and sell stocks within a day to earn gains as the stock price rises.  Regardless of the step you select, both methods require research and analysis to decide.  Without research, you are just gambling.

A benefit of the buy and hold strategy is that the income earned is passive, meaning you do not have to exchange your time for money to grow. Once the funds are invested, your money starts to work for you without your day to day attention.

Financial advisors recommend that you invest as much as possible as often as you can.  You can start by investing in your employer retirement plan, but you should also have an investment account outside of your retirement account.

Real Estate Investing

 

“Real Estate Investing, even on a very small scale, remains a tried and true means of building an individual’s cash flow and wealth.” – Robert Kiyosaki

 

Real estate is another effective path to wealth.  Like investing in the stock market, there are various ways you can enter the real estate market.  The 3 main ways to invest in real estate are:

• Wholesaling – Contracting the property at a discount price and selling it for a profit

• Flipping – Purchasing and renovating a property that is sold at market value

• Buy and Hold – Purchasing the property to rent out to a tenant for cash flow

All three methods have pros and cons, but if done correctly, they have the opportunity to set you and your future generations up for continuous wealth.  Some other methods include purchasing tax liens (purchasing unpaid tax bills and then assuming the property) or purchasing notes or the mortgage.

In addition to the three methods, you can also purchase residential (1-4 units) or commercial property (5+ units).

Real estate is a great way to create wealth, not only due to the various strategies to make money, but also the multiple ways you can create wealth with the same property.

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For example, on one property you can create wealth through:

• Asset appreciation

• Asset depreciation

• Tax-write offs to maintain the property

• Cash flow

• Equity through the mortgage pay down

Typically, you will learn how to purchase your own house before you learn how to make money in real estate.

However, owning your own home is not investing. 

While it can be nice own your home, it is not investing because the asset is not putting money in your pocket every month.  Actually, you are paying for it every month.

Another benefit to this path is that you do not have to get a real estate licenses to invest in real estate.  So you can start at any time.

Entrepreneurship

In addition to investing in paper and tangible assets such as stocks and real estate, another path to wealth is through owning your own business that provides value to the marketplace.  You can earn a profit by selling a physical good or service.  There are many opportunities to create wealth through this path and with the internet, the barriers to enter the market have been nearly diminished.

The best part about this path is that it allows you to leverage your gifts and talents on a larger scale to serve more people.  Entrepreneurship also allows you to use as much or as little time as you what to earn money.  Two main paths for entrepreneurship are:

Self-Employed – This is where you are the business and your business makes money when you work.  You have created your own employment.

OR

Business Owner – This is where you create jobs for others to operate the business.

As a business owner, where you employ others, there is a greater opportunity to accelerate your profits because you have multiple people generating income.  You allow others to operate in their zone of genius.

Each method has its pros and cons, but both can be critical paths along your wealth journey.

Conclusion

Any wealthy person you can think of has found their path to wealth through these channels.  There may be some exceptions to the rule, such as lottery winners, but often times than not, they do not stay wealthy because they don’t know the right way to invest and keep the money.

If you are serious about creating wealth then, which path(s) are you going to choose?

Choosing a path and learning as much as you can about it, is a great first step.

So will join me on this generational wealth journey? Leave a comment below and let me know which path you are interested in learning more about.

That’s Getting Your Finances On Point.