Brian Tracy outlines how to build wealth from nothing: increase your income and develop practical skills, automate savings to reach 10-15-20% of earnings, buy a home and leverage it, pay down debt fast, and cut wasteful spending. Maximize your 401(k) match and seek higher-yield investments.
June 28, 2018
59 hours a week
Start at about 10%, then increase to 15%, then 20%.
Hello, I'm Brian Tracy and today I want to talk to you about starting with nothing, as most of us do, and becoming financially successful over the course of your lifetime. Building wealth is a journey, and like most journeys, the sooner you start, the further you'll go. Therefore, whether you're saving for retirement, to put your kids through college, or to achieve any other goal, it's important to start as early as possible. Because so many factors affect your wealth and your ability to create it, you'll need to begin by coming up with a clear, detailed financial plan. The specific path you take will vary based on your ambitions, your family size and many other factors. But every plan for building wealth must contain these things. First, you must have a goal to increase your income. You can't save money unless you make money. So the first step in building wealth is to earn a high income. And this requires that you earn and you work more hours than the average person. The average person, they say, works a 40 hour week. But if you take away lunch and coffee breaks and you take away chit chat and socializing, the average person works about 16 to 18 hours a week. And they waste or burnout most of the time. Successful people work an average of 59 hours a week and they work all the time they work. Now, formal education is only part of the process of building skills. It is equally important to gain practical experience in your field because all that matters is your ability to get results. And only practical experience enables you to get results that people will pay you for. So begin working at an early age and do as good a job as possible for every employer you work for. Remember Ralph Waldo Emerson said, if you work for an ungrateful employer, work twice as hard because you're not working for him, you're working to build the character you will need to be a great success later in life. Even if you're still in school, you may be able to gain work experience through an internship, a fellowship or a part time job. Such opportunities are especially valuable if you can get course credit while pursuing them. So depending upon your ambitions and skills, founding a business may be a great investment in your long term wealth. Almost all businesses are started at a kitchen table by one person and sometimes two. Look at Apple was started by Steve Jobs and Steve Wozniak. Look at Hewlett Packard, started in a garage in Palo Alto. Look at Microsoft, started by Bill Gates and his partner that almost all of them were started by one or two people. So while you lose money in the short run, if you understand the industry and run your business well, it will eventually become one of your greatest assets. Knowledge and Skill Knowledge and skill are the keys to your success. Most professionals see their incomes increase over time. Thus, if you can achieve high earnings at an early stage, you're likely to make even more later on in your career. Next, you must be able to save and invest. As important as it is to earn large amounts of money, you'll only build wealth if you save a sizable percentage of those earnings, like 10 and then 15 and then 20%. If your employer offers a 401 plan, maximize your contribution. Put as much money in as you possibly can that they will match. Likewise, set up your paycheck to send a large portion of your money to your savings or investment accounts automatically. Automatic deductions can make you rich rather than giving you a chance to spend it first by taking the money and cashing the check. The more your money goes directly to savings and investments, the less of it you'll think about spending. Unless you plan to move frequently, purchasing a home is one of the best ways to build wealth. You'll have to pay for housing anyway, but unlike with renting, you'll get your house payments back in the form of equity. There are also sizeable tax benefits to buying a home now. Interest on debts can consume a large portion of your income, so it makes sense to pay off anything you owe as quickly as possible. One of the most important things you want to do is get out of debt. The only type of debt you want to have is debt that more than pays for itself. You own a house, you have a mortgage, you have a debt on the mortgage. But the rental payments more than pay for the mortgage and give you a positive cash flow. This is the only kind of debt you want. The more quickly you pay down the principal, the less interest you will owe, reducing your total spending on debt service. Besides maximizing the amount of money you save, make sure to maximize the interest you earn on those savings. The higher the yield of your investments, assets, and accounts, the faster your money will grow, compounding your savings over time. Finally, cut wasteful spending. As your income rises throughout your career, you'll have the opportunity to devote an ever larger percentage of your money to savings and investment, provided your spending doesn't rise. At the same time, it's important to look for ways to save. By improving insulation and investing in more sustainable technology for your home and car, you can reduce the amount of money you spend on electricity and gas. Homeowners often pay for 1000 channels, but only end up with watching 4 or 5. Consider buying channels individually from your cable provider. The cost per channel may be higher, but your total spending will be lower. Bulk purchases are cheaper in the long run than individual purchases, provided you use everything that you buy. Almost everyone makes at least some wasteful purchases in their life, so be periodically evaluating your spending and looking for sources of savings. You can then cut down on this waste and maximize the amount of money you keep. So before we wrap up, I'd like to leave you with a thought to share with your friends and followers. Great financial achievement is an accumulation of hundreds and even thousands of small efforts that no one ever sees or appreciates. There is no quick or easy way to become rich. I'd love to hear from you. So my question today is what areas of your life are you spending too much time in? What can you do about it? Leave a comment below and I'll be sure to follow up with you. Thanks for watching. And remember, if you want to change your future, take action. And take action now. If you enjoyed this video and feel it was valuable in teaching you about how to build wealth, subscribe to my channel like this video and share this video with your friends. 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