A lot of people struggle to build wealth. This isn’t necessarily because becoming wealthy is beyond the average person’s capabilities. Instead, it’s more due to the mindset most people have (and actions they take) when it comes to money.
Jaspreet Singh, a popular personal finance influencer and founder of the Minority Mindset, recently discussed ways of building wealth sooner rather than later in a YouTube video titled, “Financial Freedom: If You Understand This By 40, You Will Become Wealthy.”
In this video, he breaks down the TRD Method of building wealth — that is, the “Time, Return, Dollars Method.” If you’re interested in building wealth, here’s what you need to understand about this method and how it works.
The first element of the TRD Method is time. Time is one of the biggest resources people have, and it’s one that can help build wealth. To illustrate this, Singh talked about how Amazon grew to such a large company over a long period of time. It didn’t happen overnight.
As time goes on, it’s possible to earn more and more money since time plays a huge role on your overall returns. In his video, Singh gave an example of someone saving $1,000 a month with a 5% return for 10 years. By the end of this period, that person will have accumulated around $158,000. Someone who did the same thing for 15 or even 20 years could have an even larger amount of wealth.
The main issue with the time variable of this wealth-building method is that you can’t go back in time and make a change. You can only control what you do now and prepare for the future.
The second part of the TRD Method is return, which Singh defined as the velocity at which money can earn more money. Return is often represented as a percentage. For example, a 100% return on $1,000 is $2,000. A 200% return, meanwhile, is $3,000.
Singh categorizes returns into three main categories:
- Low-end returns: These are investments that earn interest, such as Certificates of Deposit (CDs) or bonds. They’re not the go-to method to make you rich, but they tend to be lower risk than other options.
- Passive investments: Passive investments can include real estate and stocks. In the video, Singh talked about how you can be either a passive investor or an active investor when dealing with passive investments. If you’re more active, you might see a higher return over time, though this isn’t a guarantee.
- Higher-end returns: These can include many different types of investment vehicles, including small businesses. Oftentimes, these come with a higher risk level, but can also bring about greater returns than other options.
Since there are so many options, Singh suggested doing your own research to see which types of investments align best with your goals and risk tolerance. You can also start small and build up over time as you become more comfortable — and more confident — in your investment strategy.
Last but not least in the TRD Method is dollars. This simply refers to how much money you have that you can use for investments. Keep in mind that everyone’s financial situation is different, so some people might have more or less money to invest than others.
Singh talked about two main strategies that can affect how much money you have for investment purposes. The first is to reduce how much you spend. This could mean living below your means, getting a roommate, or cutting out unnecessary monthly splurges.
The second is to increase your income. This might mean temporarily taking on a side gig or asking for a raise at work. In the long run, though, Singh suggests changing your focus from achieving a bigger salary to building more assets — especially income-producing assets that can help you build true wealth.
Ultimately, by lowering your expenses and increasing your income, you can free up some room in your budget while increasing how much you can invest.
Putting the TRD Method Together
When you combine all three aspects of the TRD Method, you can begin to acquire more assets. In turn, these assets can help you build more wealth, while lowering the impact of economic factors that might negatively affect your money — such as inflation. Just be aware of any risks that might come with your investments and find ways to mitigate them, such as by diversifying your portfolio.
The overall process can take some time, especially if you’re looking for a high return on your invested dollars. So, the sooner you begin, the sooner you can start becoming wealthy.
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