“Making your first $100,000 of wealth is so difficult because you have to do three things,” he said. “No. 1, you have to actually earn the money, No. 2, you can’t spend all of that money and then No. 3, you have to learn what to actually do with that money.”
Singh said that there are five main habits that are holding many people back from achieving their first $100,000 of wealth, and also explained the three steps to building wealth. Here’s a look at what you should not be doing — and what you should be doing — in order to build a substantial amount of wealth.
5 Bad Habits You Need To Break If You Want To Build Wealth
In his YouTube video, Singh explained that before you can build wealth, you have to understand the behaviors that are preventing you from achieving it. These are the five bad financial habits he said are most often sabotaging your success.
Having a Scarcity Mindset
Singh said that the first thing that you have to work on is your mindset.
“If you do not have the right mindset, it is going to be impossible for you to ever achieve any sort of real financial wealth,” he said. “Most of us have this limited scarcity mindset. We hate people that are successful — we have this limiting mindset that if you’re successful, I can’t be successful.”
Instead of looking for reasons why other people don’t deserve their wealth, convince yourself of the reasons that you do deserve wealth — and believe that you can actually achieve it.
“You have to have this ‘dumb’ belief that you can do something, that you can earn more money, that you can become successful, that you can have the things that you want, because without that belief, it is going to be completely impossible,” Singh said. “You have to shift your mindset to understanding that there is an abundance of money out there.”
Making Irresponsible Lifestyle Choices
Lifestyle choices are another big reason why many people never achieve real wealth, Singh said. He noted that many Americans who earn six figures still report living paycheck to paycheck.
“It’s not an income problem,” Singh said. “Most people assume that the reason that [they] can’t build any wealth is because [they’re] not making enough money. But what ends up happening, statistically, is when somebody makes more money, their lifestyle inflates. You get a raise, you get a new car, you get a bonus, you go on a nice vacation. You keep digging yourself into a bigger financial hole.”
Instead of giving into lifestyle creep, Singh recommends investing your raise or your bonus. In addition, he said that anyone who is serious about building wealth needs to live a lifestyle that is well below their means.
“If you really want to become successful, you’ve got to go through what I call the ‘decade of sacrifice’ — you live small and you’re working to earn more money,” he said. “Then you have this margin with your income. Now what you do with this margin is put this money to work. You want to invest this money. If you put in a solid decade of sacrifice, I guarantee you will surprise yourself with how much wealth you can build.”
Taking on Debt
Consumer debt is the third thing that holds so many people back from ever achieving wealth, Singh said. He gave the example of purchasing a $50,000 car that you can’t actually afford.
“When you go into debt $50,000 to buy a car, that means you’re spending this year’s, next year’s, the year after that’s income today, and you spend it to buy a car, which is dropping in value — and then you have to pay interest on top of that,” he said. “It is so normal to have a car payment, but you don’t need to have a car payment and you don’t need to drive a brand-new car.” Instead, Singh recommends using whatever you planned on spending for the down payment on a new car to purchase a used car in all cash.
Singh also cautioned against taking on credit card debt.
“If you maintain a balance on your credit card, you are using your credit card wrong,” he said. “You should never use a credit card to buy things that you cannot afford. If you have a credit card balance, you’ve got to stop spending on your credit card and you’ve got to pay down the credit card ASAP because the interest rate on your credit card is skinning you alive financially. If you cannot control your spending, do not use a credit card.”
Missing Out on Opportunities To Increase Your Income
When you are in a wealth-building phase, it’s essential to find ways to increase your earnings.
“The reality is if you’re making $20,000 a year, it’s going to be very hard and take you a long time to build any sort of wealth because even if you’re living very small, you’re only going to have a very small piece of money to invest to work to make you wealthy,” Singh said.
There are a number of ways you can increase your earnings, Singh said. These include taking on a side hustle or starting your own business. Or if you are less entrepreneurial, focus on increasing your value for your current or prospective employers.
“The value that you provide is going to dictate how much money you’re going to earn,” he said. “How can you make yourself more valuable? What skills can you go out and learn? What certificates can you go out and get? What education can you go out and get? There’s a bunch of online classes you can take, a bunch of certificates you can take online and a lot of experiences that you can do.”
While Singh does want everyone to go out there and hustle, he notes that if you don’t exercise “strategic patience,” you can end up losing your wealth.
“When you try to bypass the patience or the process, what ends up happening to a lot of people is you fall into the traps of trying to find the ‘get rich quick’ process, whether it’s the next meme stock, the next crypto coin, the next hot business idea, where you can just throw your money into this thing and hope you can make a 10x return,” he said.
“What ends up happening to 99% of people is they end up losing the money that went in. If you want to become one of the people that actually become successful, you have to be strategically patient and understand that real wealth is built over the long term, it’s not built overnight.”
How To Build Wealth
Now that you know what not to do, here’s what you need to do to build up your first $100,000, according to Singh.
“If you want to build wealth, it is really not that complicated,” he said in the YouTube video. “It comes down to a basic three-step formula: first, you make money, second, you spend less than what you make, third, you invest the difference.”
The Velocity of Money
When it comes to deciding how to invest your money, Singh said it comes down to understanding a concept that he calls “the velocity of money.”
“The faster you can grow your money, the faster you can grow your wealth,” he said.
Typically, the fastest way to grow your money is to start your own business — but this is also the fastest way to potentially lose it all.
“Putting your money into a business and getting a 100% return is way riskier than throwing your money into a savings account and getting a 1% return on your money. But this is where, between the savings and your business, you’ve got to find the right velocity of money for you,” Singh said. “That’s going to depend on your risk tolerance, your education level, your interest level and how much work you’re willing to put in.”
Tips for Entrepreneurs
For those who want to accelerate their wealth-building, starting a business may be the best (albeit riskiest) investment they can make.
“If you want to create something, the name of the game is, how can you build something? What value, what service or what product can you create that will make people want to open up their wallets?,” Singh said.
Once you get your business off the ground, it’s essential to make it scalable in a way that doesn’t rely entirely on you.
“If you can continue to grow the supply and you spend your time focusing on the demand side — on the growth, on the customers, on the marketing side — now you have a real business that you can sell, that you can step away from, that you can have another CEO run,” Singh said. “That’s where real wealth is built on the entrepreneurial side.”
Building Wealth Through Investing
For those who don’t want to start their own business, Singh recommends growing your wealth by investing in the stock market and/or real estate. He notes that riskier investments — i.e. buying individual stocks or buying investment properties on your own — tend to have higher payoffs, but there are also passive ways to invest that can grow your income over time.
“In the stock market, there are a couple of different ways that you can invest your money,” Singh said. “You can invest your money by putting your money into individual companies. You’re going to have to put in the work to learn about the company, to study the financials, learn about their products, keep up with the company’s doings and make sure that the company is on track to continue growing — that way you continue to make more money. That’s more of an active investment.
“Option two is being a passive investor,” he continued. “Instead of investing in a company, you can invest in a fund that will give you exposure to a lot of companies. Your risk is much less because if one of the companies you invest in goes bankrupt, you have other companies to balance it out, but it also means your upside is limited. The way that you win is you create a system where every week, every two weeks or every month, you just continually keep buying more of those funds. That’s how you build wealth over the long term.”
Singh notes that you can be both a passive and active investor in order to build wealth via the stock market.
“You could do the same thing with real estate,” he said. “If you are interested in investing in real estate but you don’t want to put in the time or the effort, or you don’t want to deal with tenants, then you can go to real estate investor conferences. There are always people that are looking for money, and you can be an investor into one of these deals, called syndicate deals. It’s a way for you to invest in real estate with less cash and to be completely passive. There are also platforms online that allow you to do this with smaller amounts of money.”
Whichever method you choose, “the key is to keep buying and building more assets, but also look for the opportunities when they come your way,” Singh said.
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