The One Word That Unlocks Abundant Wealth
馃攽 Are you tired of feeling like it’s nearly impossible to get rich? The reality is that we all have the potential to become abundantly wealthy, but sadly, most of us are making the wrong moves trying to get there. However, if you start harnessing the power of the one word I’m about to share with you, you’re guaranteed to start seeing more financial success than ever before.
When you think of the word “rich,” what comes to mind? Private jets and supercars? Or just having enough money to never take orders from a boss again? Both sound pretty sweet, but if we want to set ourselves up on the path to riches, we first need to know what level of wealth we aspire to have.
The Two Levels of Wealth
There are two levels of wealth, and understanding the differences between them is crucial.
1. The Mainstream Affluent Class
The first level is what I consider the mainstream, affluent class. These are highly educated, motivated, and upwardly mobile individuals who, by most people’s standards, would be considered rich. However, in many cases, they probably don’t feel as rich themselves as they aim to be.
The mainstream affluent class typically has investable assets of between $500,000 and $3,000,000 and a net worth of between $500,000 to $5,000,000. The range largely depends on factors like age, location, and household size.
A good example of people who fall into this first group of wealthy individuals are HENRYs (High Earners, Not Rich Yet). These are people making sizable incomes who have yet to have the time for their earnings to convert into assets that put them in the seven or eight-figure club.
The mainstream affluent class loves investing in assets like stock index funds, real estate, and more recently, cryptocurrencies. While being part of this class is a great position to be in, with no worries about bills and the ability to enjoy life’s niceties, this level of wealth may not be enough for some.
2. The Truly Rich
The second level of rich is what most people think about when they hear the word “rich.” We’re talking vacation homes in the Hamptons, first-class flights, $100,000 cars, and generous donations to charity (with statues named after you).
The truly rich have investable assets of at least $5 to $10 million and a net worth of at least $10 to $25 million, depending on location, age, and household size. In a bull market, the truly rich crush it with multi-million-dollar gains a year. Conversely, in a bear market, they get beaten up the most.
Now, how do the truly rich get to this point of financial success, and which assets do they own? Good question.
The truly rich have a minority of their investable assets and net worth in index funds. Instead, the majority of their net worth is in their business and other business ventures.
The Word That Sets Them Apart: Risk
Now that you know about the two levels of wealth, can you spot the difference between these two groups? No, it’s not their level of income or investable assets. Sure, those differ, but they’re not the main driver in the disparity of their financial success.
What sets them apart, and the word that will make you abundantly wealthy, is risk.
Let’s rewind the tape and really look at how these two groups allocate their money. Once we do, you’ll have all the information you need to start your journey to becoming part of the truly rich.
If you recall, those in the mainstream affluent class tend to focus their income on buying assets like real estate and index funds. While these are often recommended assets for good reason (they provide good returns with moderate risk), will they allow you to join the class of the truly rich? Not likely.
This is because their upside potential simply isn’t enough for fortunes to accrue to the point of being uber-wealthy. Let me share an example to explain why this is the case.
Let’s say you make $150,000 a year, and after your annual expenses, you can invest $20,000 annually into an index fund. If you do this for the next 40 years and receive an average return of 7%, you’d have just under $4 million when paired with your principal residence and the cash you keep in the bank. This would put you in the upper level of net worth in the mainstream affluent class.
Now, don’t get me wrong, this is a great position to be in. However, given that investing in index funds involves only a moderate amount of risk, the upside won’t be as great compared to how the truly rich grow their wealth, which is through building and investing in businesses.
When you look at the Federal Reserve Survey of Consumer Finances from 2016, you can see that as people’s net worth rises, one group of assets continues to grow larger: business interests. If people are striving to become abundantly wealthy, they wouldn’t want to focus their time and attention on assets with very little growth potential, like cash, homes, and cars. Instead, they want to put their money into more lucrative wealth vehicles like businesses.
And if you study most of the richest people on Earth, this is exactly how they got rich. Bill Gates started Microsoft, Elon Musk started Tesla, and Jeff Bezos started Amazon.
However, with more upside comes more risk. If you buy a house, the chances of it increasing in value over time are almost guaranteed, meaning your risk is low. However, if you start a business, it may work, or it may not. For every Elon Musk, there are thousands, if not millions, of budding entrepreneurs who haven’t achieved the financial success they desire.
The Power of Leverage
So, before you decide to pursue your next business venture, it’s important to understand why this form of asset is so efficient at making money. Any good business employs what we call leverage, which can come in many forms, such as capital, labour, code, and content. And the more of these levers you can use, the richer you can become.
Think about it like this: which business will be able to produce more products or provide more services, one with five employees or 500? More employees mean more output, and more output means more revenue and profits. This is why companies like Amazon have hundreds of thousands of employees because more hands mean more profits.
Alternatively, suppose you have capital leverage working in your favor. In that case, you can acquire all the best equipment and subject matter expertise and spend the most on marketing to maximize your chances that your business will succeed.
The point is that with a business, you have more tools in your tool belt to employ. And it’s for this reason that most of the wealthy people you know are business owners.
Time: The Other Separator
So then, given this correlation between businesses and high levels of wealth, it’s obvious that you must pursue business ventures in your wealth-building journey, right? Not quite.
While I told you that risk is what separates the mainstream affluent class from the truly rich, what also ends up separating the two on their quest for financial success is time. Both wealth-building approaches take a very different amount of time investment, and this is a consideration that cannot be overlooked when deciding how rich you want to be.
For instance, if you are passively investing in index funds, that takes no time at all. You simply earn your income, automate your investments, and can go about your life as you would, all the while growing rich by the day.
For those who pursue business success, their time involvement is much more substantial. For instance, Elon Musk admitted that at the beginning of starting Tesla, he was working 100-hour weeks. And as you can imagine, when you work that much, many other areas of your life are bound to suffer. So sure, you will be much more monetarily wealthy, but when it comes to wealth in the form of health, family, and pleasure, you may find yourself being deficient.
Finding Your Path
So how do you choose which path to pursue, assuming you do have some aspirations of becoming wealthy? What I found to work in my wealth creation plan is to set your goal wealth figure and work backward from there.
For instance, my goal is to amass $10 million. Using the 4% rule would allow me to live off $400,000 a year, which is more than enough to live comfortably, travel, and never have to worry about bills again.
Once you have this figure, you need to decide which assets you can use to get you there. To reach $10 million, you will likely need a good balance of business interests and traditional investments like index funds.
And that’s exactly what I’m doing. I figure that if I can get my business to $200,000 in profits per year, that can allow me to invest $50,000 annually, which over 40 years will grant me the $10 million I desire.
However, let’s say you’re aspiring to be a nine-figure individual. Well, then buying a ton of rental properties or investing in S&P 500 ETFs probably isn’t going to get you to your goal.
Alternatively, if you want to amass $1 million, starting a business that carries a high risk of failure is probably not necessary.
There is one final consideration that you need to keep in mind on your quest for financial success, and that consideration is your level of satisfaction.
For instance, right now, I may think that I will only be content if I am making $400,000 a year. However, if I get to $300,000 a year and I am completely content, I will likely not have as much drive to push for another $100,000 since the extra effort will only yield me minor marginal returns.
As you’ve probably realized in your own life, what we think we want and what we truly want are often two very different things. Not only that but our wants and needs change over time. When you’re younger, you will likely want to make more money and buy flashy things, but as you age, you may prioritize time with family and being more covert with your wealth. Only time will tell, but by knowing what level of wealth you want to strive for, you can create a plan and start your journey to becoming abundantly wealthy.
The Bottom Line
Wealth is a journey, not a destination. It requires a clear vision, a solid plan, and the willingness to take calculated risks. The word that unlocks abundant wealth is “risk” – the very thing that separates the mainstream affluent from the truly rich.
Remember, the journey to wealth isn’t just about the numbers in your bank account. It’s about finding the right balance between financial success, personal fulfilment, and overall life satisfaction.
At Moonswipe, we understand the challenges and complexities of navigating the world of business as a solopreneur. That’s why we’re here to provide you with the insights, tips, and guidance you need to grow your ventures while maintaining a healthy work-life balance.
So, are you ready to embrace risk and embark on your own wealth-building journey? The path may be challenging, but with determination and the right mindset, abundant wealth is within your reach. Start today, and let Moonswipe be your trusted companion on this exciting adventure.